Economic cycles are very real and matter. Real estate capital market cycles are particularly hard to predict, as they are now mainly driven by global capital flows, themselves a function of macro forces. It is, in short, very difficult to time capital raising well. The best advice is therefore to make sure you earn the respect and trust of at least three counter-cyclical investors. They can help you raise capital at the right time.

It is always wise to use leverage carefully. Leverage makes returns look even better in upswings but can drag them underwater in downturns. This is why real estate is seen as an equity play during bull times and a highly leveraged play in bear times, which tends to accentuate market swings: a cause of stress for many and a source of opportunity for a few.

Diversification is also important, as it provides a level of portfolio insurance. Diversification will ensure that a portfolio will live to see another day during a time of crisis, so diversification and scenario testing are key skills for successful fund management. However, this is not about adopting a scattergun approach. Rather, it is a matter of careful thought in diversifying income streams and covenant strengths of tenants, as well as debt maturities.

Investing in well-located properties is less risky and typically yields better returns, while prime locations continue to offer the best long-term value. Properties in high-demand urban areas or those with strong economic fundamentals tend to appreciate more and provide stable income.

A long-term lens is useful for building convictions. Here, studying the megatrends shaping the world will ensure that you are responsive to these and also can provide more robust views on what’s to come and how your strategy is consistent with megatrends. At PATRIZIA, we have defined four megatrends shaping the next 20-plus years: the digital transition, urban transition 2.0, energy transition and the living transition – what we call the DUEL megatrends.