RUECKERCONSULT
"Core vs. Value Add" panel discussion, INVESTMENTexpo 2026, Berlin
"Classic core is largely dead. This is the decade of value add." That was Ramin Rabeian's provocation at last week's Rueckerconsult INVESTMENT Expo in Berlin. The more interesting conclusion, however, was that the distinction itself may no longer matter. What emerged was not a rotation from one strategy to another, but a more fundamental shift: the investment playbook that defined the past decade is being quietly dismantled.
The four panellists — Sebastiano Ferrante of PGIM, Rabeian of Montano Real Estate, Sebastian Schneider of DWS Alternatives and Felix Frankl of EZVK — agreed on one thing: maximum uncertainty. Ten-year swap rates, which had fallen to 2.70% in February, have since moved back above 3% amid renewed geopolitical tensions. Transaction volumes remain subdued. Institutional investors are either over-allocated, structurally constrained, or waiting for valuations to reach levels at which exits become viable.
The market is not merely slow: it is not yet clearing. Much of the repricing is happening through entity-level deals that never appear in official statistics, while many portfolios have yet to absorb the full extent of the correction. As Frankl put it, "the bill will be read when the prolongations come due."
Against that backdrop, Ferrante offered the clearest reframe. The low-rate era, he argued, was not the norm but "the great anomaly". A market with 5% prime yields and financing at 3.5–4% is not distressed: it is normal. The crisis was the repricing from 3% to 5%, not the level at which the market now sits.
What gives that argument particular weight is that Ferrante acted on it early. PGIM was among the first houses to stop investing altogether in 2022 — "radically", as he put it — precisely because the team had modelled what a cap rate correction of that magnitude would mean. It was not a comfortable call at the time. "I was nervous making those decisions in 2019, 2020, 2021," he said. "Now I find this one of the greatest opportunities we have seen." Europe, having corrected more sharply than the US or Asia, now presents something it has lacked for years: a genuine entry point. Prices have adjusted, supply is constrained, financing has returned, and leverage is once again positive in parts of the market.
Value add: compelling thesis, harder maths
The case for value add follows naturally from that reset. Core assets in stabilised German residential or prime office are trading at yields of around 4%, barely above risk-free alternatives. Value add, in theory, provides that premium through repositioning, refurbishment and leasing risk.
In practice, the arithmetic is less forgiving. As Rabeian pointed out, a value-add case stabilising at 5% can quickly fall to an effective 3.5% once capital expenditure and the investment phase are properly accounted for in a ten-year business plan. At that point, the comparison with AA-rated bonds at around 4% — without vacancy risk, planning delays or execution uncertainty — becomes unavoidable. Real estate is no longer competing with itself but with the broader capital markets.
That has implications for capability as much as pricing. Ferrante was blunt: "Risk must be properly priced. Full stop." The final years of the last cycle saw core investors moving into value-add strategies without the teams or discipline to justify the risk, acquiring assets on the assumption that rising markets would do the work. That assumption has been removed. Value add remains viable, but only where the risk premium is real and the execution credible.
Core without the comfort
If value add has become more demanding, core has become less reassuring. The assumption that core real estate behaves as a bond proxy is increasingly difficult to sustain. "Core is subject to value add," Frankl observed; even supposedly stable assets now require active intervention. What was once a quasi-fixed-income allocation carries a greater degree of operational and market risk than portfolios were built to expect.
What matters more than the strategy label is the ability to execute. The dividing line is no longer between core and value add, but between those who can manage assets actively, price risk realistically and deliver on business plans, and those who cannot. As Ferrante put it: "No core asset stays core forever."
That shift is visible in how core itself is being redefined. "Core going forward will not be 80% shopping centres and offices," he said. US open-ended funds have long reflected this, with office allocations typically limited to 15–20%, not as a reaction to recent events but as a recognition of underlying return volatility. Europe built portfolios around a narrower definition of stability and is now adjusting.
The emerging version of core is operational and demographic: residential formats, student housing, senior living, hotels, and newer segments such as single-family rental. PGIM's move into clustered single-family housing addresses a straightforward gap. Family-sized homes are structurally undersupplied in most major cities, new construction is concentrated in smaller units, and where ownership is out of reach, rental demand fills it. The UK model, where major pension schemes are invested and rent performance has tracked wage growth consistently, is the reference point.
The broader service model argument extends further. In PGIM's microliving operations, Ferrante noted, one of the most valued tenant services has proved to be pet care, a detail that points to something larger. Residents are overwhelmingly between 20 and 30; the underlying need is community. The same thread, he observed, connects microliving to senior living. "If we finally stop thinking in concrete and understand that we are providing services, enormous opportunities open up." In other words: follow the people, not just the money.
That argument carries implications beyond product selection. Europe, Ferrante argued, must open itself to the global institutional capital that dwarfs the domestic core pools of the past decade, pools that may never return in their previous form. To attract that capital, the market must offer properly priced risk premiums and speak the language global allocators use. Without that, the larger flows will go elsewhere.
For investors and managers able to operate within the new constraints, the opportunity is real. Europe's repricing, combined with limited supply and the return of financing, offers a more rational entry point than at any stage in the past decade. But it is an opportunity that has to be earned. For those still waiting for the old cycle to return, the message from Berlin was less comforting: the market has moved on, whether their portfolios have or not.