By now we have all read PwC’s latest 2014 Emerging Trends in European Real Estate, which contends that while 2013 was all about investment in truly core assets (aka, prime real estate in prime locations), price inflation and yield compression have forced more opportunistic investors out…out to Tier 2 cities, secondary locations in Tier 1 cities, development opportunities and riskier alternatives like debt, student housing, and data centers.


For ASG, this is no new trend. We actively pursue investments that are not traditionally considered core assets. Rather than the asset class or asset type, we focus on the opportunity that presents itself at a particular point in the real estate life cycle. Until the past year, this has meant investments in high quality assets in secondary locations of Tier 1 cities in Germany. These have usually required renovations or lease up. As ASG founder Saul Goldstein recently commented in a Bloomberg article “For us it’s a value-add situation. We do our leasing work, we stabilize the asset and then we move it in a couple of years.” It is the quality of the asset rather than the type of asset that remains constant.


Perhaps the new trend over the past year is the shift to Tier 2 cities altogether. While secondary locations in more prime cities like Berlin, Frankfurt, Munich and Hanover may have defined ASG´s investment space in the years leading up to 2012, this past year saw a clear shift to investments in secondary cities as we completed transactions in Dresden, Mannheim, and most recently Leipzig, with more planned for the future. Further lending credence to the popularity of secondary cities, large fund Invesco just recently purchased the Dresden Prager Carré development.


As PwC reports, even these non-core assets are trending toward core as the yield gap between the two begins to shrink. What does this mean for truly opportunistic investors like ASG? Writer Rosabeth Moss Kanter says “to stay ahead, you must have your next idea waiting in the wings.” This has never been more relevant than in this increasingly competitive market. 2014 promises to yield a lot of interesting opportunities for those who can predict and execute on new ideas.