Weekend Interview: Harrison Street’s Paul Bashir On Consumerism And The Next Big Investment Opportunity In A Fractured Market

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

The American consumer rules the world, and Harrison Street has built a business on understanding that, putting that knowledge to work at home, then exporting it abroad. 

Paul Bashir is CEO of Harrison Street’s European business and the person in charge of leading the firm’s expansion on the continent where it first invested a decade ago. 

The company, which has $55B in assets under management, focuses on alternative real estate asset classes. The property world has pivoted to its way of thinking since Harrison Street was founded in 2005. The sectors on which it focuses, like student housing, rented residential, senior living, self-storage and life sciences, once fringe interests for investors, are very much in demand. 

A proud Geordie from the north-east of England, Bashir told Bisnow how his background in management consultancy and a property career that involved investing in Eastern Europe after the fall of communism led to his role at one of alternative real estate’s biggest investors. Bashir also dove into how and why American consumer behaviour is one of the defining factors that shape the world we live in and the sectors in Europe where Harrison Street sees the best growth potential. 

This interview has been edited for length and clarity.

Bisnow: How did you get into real estate?

Bashir: I trained as a chartered accountant at KPMG and spent the first 10 years of my career in corporate finance, M&A, working with a range of small to very large global businesses, and I really enjoyed operational activities. I was abroad for about five years. I moved back to the UK and moved into a 100% real estate business for the first time and, because of my currency and operational background, found myself in more of a corporate, operational role pretty quickly, which was very unique at the time, as the U.S.-style real estate private equity was just starting to emerge in the UK.

I actually found I really liked real estate because it is a people business. Being from the north-east, I’m a naturally chatty personality, so the industry really resonated with me.

In those early days, I spent a lot of time in places like Romania, Croatia, Germany, Austria, and I saw how the real estate markets were very, very different across Europe. Also, in my previous times at KPMG, I'd spent a lot of time in the U.S., working in New York, Asia and Bermuda, and I think it gave me a perspective on Europe from the U.S. So I saw how North American capital has a perspective on Europe as homogenous bloc, and within real estate, it couldn't be more different.

Especially if you look back to 20 years ago, how some of those sectors looked, Eastern Europe, a lot of those countries were just joining the EU and only just emerging out of quite an interesting period of history, coming out of communism. There was a huge, huge opportunity.

Bisnow: What did you learn from investing in those post-communist emerging markets?

Bashir: I think data drives so much of what we do, but back then, especially in Europe, we had very little data. It was very much driven by data that you can capture in the local market, which was very limited. Not a lot of it was publicly available so it was very, very restricted. So a lot of it was built on real investment gut feeling, what you could see and feel on the ground. What was the average person doing? If you speak to people on the street or speak to colleagues, what were the challenges they were facing in their day-to-day? In those days, it was very much a case of gut feeling without any data to support an investment decision. 

Bisnow: Why has the American consumer been such an important part of Harrison Street’s investment thesis?

Bashir: Firstly, demographics are at the centre of everything we do, everything that drives our alternative sectors. It’s age [and] birth rates driving student accommodation. It’s the ageing population, people living longer, that’s driving senior living. It’s digitisation that’s driving data centres. How that's shifting and how we use and consume real estate, the socioeconomic issues we're seeing, all of those factors really drive our sectors.

And also, we look at a lot of data from the U.S. What we've learned in real estate is we are all consumers. Whether we sit here in the UK, whether we sit in France or Germany or in the U.S., we might have different habits driven by our environment. But fundamentally, our needs are the same. And then we can look at how there is a lot of data and trends coming from the U.S., and we really try and extrapolate them across Europe and say, ‘Where are they going to really make the biggest impacts in the next five or 10 years?’

There may be some cultural or local nuances which may impact exactly how that is extrapolated out because, obviously, it won’t be extrapolated exactly the same across every country. But that really allows us to look to some of those data points across Europe [pointing] to really interesting pockets of investment opportunities across all sectors and also look relatively early in the cycle.

We were one of the first to really invest at scale in student housing in Europe in 2015 and then BTR in 2017, and we invested in life sciences quite heavily towards the end of 2019, early 2020. We did that really looking at the market in the U.S., and then also looking in Europe and saying, “Ultimately, this is a very nascent sector. It's going to grow. It should have the same fundamentals from a demographic perspective.”

Bisnow: Why is American consumer behaviour so important, and how did it become such a dominant factor abroad as well as at home?

Bashir: I think, fundamentally, what we've seen in the last 10, 15, 20 years is just consumer-based trends really started there. And a lot of that has been through technology, the adoption of new forms of technology, which has really driven a lot of consumer habits. But the answer is also slightly different by sector. 

Student accommodation is really driven by space and the fact that they've been able to build relatively affordable, amazing facilities with basketball courts and lazy rivers and all that sort of stuff. They've been able to do that because they haven’t been constrained by space. And that has changed consumer habits. It's like anything. You have an iPhone 15, you think that's awesome — and then they release a 17, you want to have that. It's your consumer habit that you always want to have the best.

So they've raised the bar constantly over the course of the past 20 years, [and] they've been able to do that because of the land availability, because of the space, because of the lower cost to develop and a deep capital markets and banking system. And also because of the relative wealth per GDP in the U.S. compared to some of the European countries. Families in the U.S. have been able to afford it, just the cost of education in the U.S. versus Europe, it's at least two times [the cost].

In Europe, people always said 20 years ago, “Well, students won't pay for that.” But of course they will. Because if you want to change consumer habits, you raise the bar, and that's what's constantly been happening. Nothing is identical, and there are idiosyncrasies between countries, so we’re finessing the strategy for each country.

I think there's a lot of different and diverse reasons by sector and geography. But I also think, because of the information age, that some of those differences are becoming less acute. 

Bisnow: What new sectors are you excited by in Europe?

Bashir: Senior living is something we’re looking to make a major push into. When we look at the sector, traditional care homes would be just one of many solutions we'd be applying to that — we use the term assisted living, independent living to really describe the sort of umbrella of solutions within the retirement sector. And again, this is where the U.S. has led the pace. 

You've seen a constant increase in that average life expectancy, which means 70-, 75-year-olds now are very active, they want to travel, they're very social, their needs are very different to what a 70- or 75-year-old was maybe 10, 15, 20 years ago. That means as a consumer, again, the needs and the wants are very different. I think what we'll see in this next phase is less focus on high-acuity assets, which have always been dogged with scandal and the fraught interface with government social policies.

If we look at where that growth of residential for rent is moving and really where we expect it to be over the next 20 to 30 years, we're really excited about that independent living and assisted living space. These are effectively residential, for-rent buildings that are geared towards the older community — more massage tables than pingpong tables — and the idea is that you're creating communities that people want to be in. 

Bisnow: Health seems to be a major focus of society right now.

Bashir: As we look forward, one of the sectors where we very heavily invested in the U.S. — and I'm intrigued and really excited about potentially investing in Europe — is medical offices.

I think if you look at where the solutions are coming in the healthcare sector, it is that combination of private and public care working together. And I think we can see some nice facilities in London, but they're quite unique and quite limited. When you look at the regions, even when you look at some of the European countries that do well, I think you can see some really interesting opportunities there. So I think healthcare for us means a really broad spectrum of residential, but also looking at medical office and other facilities to really be able to add meaningful infrastructure into that healthcare market.

Bisnow: What are the big opportunities in the markets where you’ve already invested in the UK and Europe, student housing, BTR and life sciences? 

Bashir: We're really excited about the kind of core, core-plus opportunity right now. What we've seen in the course of the past couple of years is sort of a bifurcated market in the sense that all the stresses we've seen in the market have been driven by the capital markets environment. The fundamentals of our sectors have been incredibly strong, you know, very high occupancy, incredible rent growth and a real falloff of supply across pretty much all of our sectors. 

So when you look at what's happened in the market over the last 12 to 24 months, the repricing that's occurred across the whole real estate market, values are down 10%, 20%, 25% in some instances. You’re seeing some really interesting buying opportunities for core assets. So built, operational, stabilised, but with tremendous growth opportunities generating quite attractive core-plus returns.

Bisnow: Give us a bold prediction for the rest of the year. 

Bashir: I actually want 2024 to be a very uneventful year. After all of the chaos of the past five to 10 years, we need a relatively stable, boring year with no major surprises. However, I would like Newcastle to be top of the Premier League come 31 December. Which would, of course, be a surprise. A nice one, though.

Bisnow: What does an average weekend look like for you?

Bashir: I've got three young kids, 14, 11 and 8, so my weekends are normally being an Uber driver, ferrying kids between gymnastics, rugby, cricket, hockey, all that sort of stuff. So that is mainly my weekend, and if I can sneak in a round of golf, I’m incredibly lucky. I like to play a bit of golf at the weekend, but really, weekends for me is all about family time.