(EP)FIRE4ICE: Finance and Real Estate for the development of corporate innovation

A forum of the EPFIRE - Executive Program in Finance and Real Estate


The different classes in the EPFIRE - Executive Program in Finance and Real Estate, now in its 15th edition, came together in a unique event, the EPFIRE Forum - FIRE4ICE. Chief Executives and Bocconi faculty members led the debate with a focus on Finance and Real Estate for the development of companies’ innovation. “The event aims  to investigate how finance and real estate should respond to the new needs of households and businesses,” EPFIRE Director Alessia Bezzecchi  pointed out in her introduction. “Technology, the pandemic, inflation, uncertainty, sustainability are all drivers of change that require flexibility, accelerated innovation processes and new solutions from companies.” Andrea Cabrini, the Director of Class CNBC, the forum’s moderator, opened the proceedings by highlighting the macroeconomic scenario.

These are tough times for optimists. Fresh out of a two-year pandemic that paralyzed the global economy, we have found ourselves facing an international crisis, unprecedented since the end of the Cold War, with the specter of stagflation hanging over us. But it is precisely when the worst predictions are in sight that we must try to change our perspective, and look beyond contingency. And few other sectors have the ability (and responsibility) to do so like real estate, which is structurally required to think long-term. And see “the glass half full,” as Andrea Beltratti, Bocconi University Full Professor of Finance, PhD Yale, put it.

One way to be realistically optimistic is to pair every strong strategy - designed to cope with and not suffer an era of disruptive change - with equally effective execution. This was emphasized by SDA Bocconi Associate Dean for Open Programs Rossella Cappetta in her introductory remarks: “Imagined and planned transformations then need to happen, and this depends on the structure and organization that support them. In this extremely fluid era, talking about organization does not sound very ‘sexy’. But in order not to suffer change, responsibilities must be precisely defined and for that your organization has to be clearly structured.” A concept that has a strong impact on all sectors of the workplace. “We must protect the ‘beauty’ of work, which means quality work (for the person) and productive work (for the business),” Cappetta continued. “Working conditions have been disrupted by the pandemic, and now it’s not just about working from home, it’s about identifying new reasons for sharing value among people, businesses and communities. Of course this applies to work times and work places, but also to corporate welfare, training, participation in decision-making, transparency of information.”

Andrea Cabrini's suggestions moved the discussion to the specific field of real estate. With unparalleled inflation in the past 30 years and a shortage of raw materials that is straining the profitability and sometimes viability of investments, what are the prospects for the sector? “What we should never do is make decisions in the heat of the moment,” Beltratti warned, “inflation is a temporary phenomenon compared to the time horizon of real estate investments.”

“In recent years, we have got used to abnormal levels, but let’s remember that inflation has always been a friend of real estate, for it increases the value of the investment,” said Armando Borghi, Bocconi University Professor of Real Estate Finance and former CEO of City Life, who also highlighted the fact that new life- and work- styles are changing the market: “There is a demand for more floor space in residential use, but this happens against substantially unchanged incomes, and leads to moving outside big cities, also aided by  the possibility of working from home.”  But demand remains high and often exceeds supply, Marco Grillo, CEO of AbitareIn, confirmed, “which has led to an increase in prices, by 8-9% on an yearly basis in Milan (over 30% in the last 4 years). On the other hand, construction costs have also risen by 30-40% in about a year.

Regina De Albertis, Assimpredil ANCE president and board member at Borio Mangiarotti, expressed a similar concern: “We are facing great opportunities but also great difficulties, first and foremost the scarcity and rising price of raw materials; there is a risk that the PNRR allocations are no longer enough. The private market was stimulated by the superbonus and now is also at risk, having made investments based on previous prices.” The solution is innovation. ”Our industry has enormous margins for innovation. Now it is no longer a choice but a necessity,” De Albertis continued. “One example is BIM - Building Information Modeling, a digitized system to optimize all design and production phases by sharing information throughout the supply chain, with greater accountability of the different actors and more efficient and effective decision-making.”

Paola Cillo, Bocconi University Associate Professor of Management & Technology and SDA Bocconi Claudio Demattè Director of Corporate and Financial Institutions  Research, also insisted on innovation: “In the past, innovation was an exceptional event in the life of companies, today it is a constant that companies must get used to.” But what is the driver of innovation? Technology is no doubt an important facilitating factor: “Investing in new technology is key also for real estate. Above all, this means changing people's cultural approach and behavior, one of the hardest things to do.” But, Cillo continued, “I think the main driver of innovation is the market, defined today not only as consumers but as a set of stakeholders. What is the emerging demand today? Value that is sustainable and shared.”

Andrea Ruckstuhl, Head of Continental Europe at Landlease, is also convinced of this: “Increasingly, process innovation is being shaped by the new needs of developers, and large real estate players must try to anticipate them by becoming market programmers. This means making forward-looking and often challenging investments, but that’s where we’re lucky: we manage long-term projects, which are less impacted by contingencies.”

The closing comments focused on new market scenarios: “There is a growing interest in alternative assets,” Beltratti said, “and flexible financial tools are also increasingly necessary.” Everyone agreed that market evolution requires the role of companies to change: this industry is also moving towards a sharing economy, and although it is “important to consider that home ownership is still the main investment for Italians, including from an emotional point of view,” Grillo recalled, there is an increasing shift from buying to renting. The transaction does not end with the sale, and “real estate companies must evolve from producers of goods (houses) to housing service providers,” Ruckstuhl continued, and “products should be increasingly targeted, that is, shaped for different groups of users (senior living, students, etc.),” Borghi confirmed, “also relying on government rent support for the weaker social groups,” De Albertis concluded. In short, real estate is becoming one of the main laboratories to experiment the possibility of boosting economic value together with environmental sustainability and social cohesion.



SDA Bocconi School of Management

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