Jones Lang LaSalle | Notes from Davos

Fifteen hours of opinions and serious discussion on the state of the world. This is not MIPIM.

Everyone is trying to figure out how everyone else is feeling about the business climate. This could well be strongly self-fulfilling and reinforcing, because there is a distinct theme in the air…that the fear of financial Armageddon is receding and while problems persist, businessmen feel more confident today than 12 months ago.

• Corporate America in good shape, fiscal cliffs have been deferred
• Euroland is more stable
• No China political drama and no hard landing
• Lots and lots of other stuff, including a strong shift in the mood in India (more on that tomorrow)

In many of the discussions, I have found it interesting that the pre-GFC grandiose vision of “Globalisation” being a one-way street to a standardised, homogenous world has gone. It has been replaced by a new pragmatism: an acceptance that the world is a patchwork, that one set of regulations doesn’t work for all, but that business can and will still be done across borders.

We may not all choose to use the same electrical plugs…but adapters actually work pretty well.

I think this is great news for Jones Lang LaSalle, because we thrive off the differences in property markets around the world. We are local experts who can work globally. And we provide consistency in a wonderfully diverse and inconsistent world.

Alastair

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Categories: World Economic Forum 2013

Since my last visit to Davos and the WEF in 2011 (Christian Ulbrich and Peter Roberts represented us last year), the first thing I’ve noticed is that the meeting is clearly a much bigger event this year. There are more people from more companies and more governments, and that suggests more confidence than two years ago. The mood and ‘buzz’ in the air are distinctly more positive. Also, if 2011 was the year of the iPhone in Davos, 2013 is definitely the year of the iPad. It seems that you need WEF credentials and a tablet to attend.

My second observation is that the banks are back in force, and particularly the big U.S. banks. For reasons of image and ‘optics,’ and because they had to deal with so many pressing issues arising from the global financial crisis, banks were light on the ground here in recent years. Their renewed presence suggests that their problems are no longer as pressing as in the past.

At the banking session I attended today, regulation was a big topic. Banks worldwide are dealing with multiple layers and levels of new regulation. By making it harder for them to manage their business, this is perversely increasing risk rather than reducing it. There was also an interesting and sobering view that the new regulations will not prevent the next financial crisis but, at best, will make it a little less severe.

Third, in between today’s sessions, I met with clients and prospective clients. The list included the:

• Chairman of a major European bank, which is a client
• CEOs of three of the four big global accounting firms
• CEO of a large chemical company, also a client
• CFO of a major hotel chain, a client
• CEO of a leading, European-based electronics company, and a client
• Finance Director of a major aircraft manufacturer, a client
• CEO of a U.S.-based hotel REIT
• CEO of a major French telecommunications manufacturer, a potential future client

But enough title dropping.

Fourth, the economic session I attended today focused on the situation in Europe. The general sense is that the euro challenge is now stabilized – not solved, but stabilized – and is beginning to be seen as yesterday’s problem.

With the currency crisis moving into the background, two other issues have come up the European agenda. First, economic growth, of which there is precious little, even in the strongest European economies. And second, jobs, and particularly jobs for youth, who have suffered tremendously during the last five years.

My sense of the economic situation in Europe is that, while the euro, rather like the U.S. fiscal cliff, seems under control if not resolved, the agenda is shifting to an urgent need to drive growth. Add to that the recognition that growth will not come from government spending, but through business spending. Such growth will depend on more favorable employment law and business regulations across Europe.

A footnote: UK Prime Minister David Cameron’s plan to hold a referendum on Britain’s future in Europe was a popular topic in Davos today. Italian Prime Minister Mario Monti called Cameron’s comments “interesting” and thought they would set up the UK to remain in the European Union. The German and French executives I sat with at dinner tonight are desperately keen to see that happen because, without a UK presence, they see no credible economic, cultural and social links between Europe and the U.S.

Enough for today, more to come tomorrow.

Colin

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Categories: World Economic Forum 2013

As I sit here at my computer at the end of day one, I am trying to figure out how best to share the helter-skelter of interesting ideas and perspectives that I have heard today.  I will start by saying that it was a beautiful day; clear blue skies and crisp temperatures keeping the snow pristine.  It is a shame that there is no time to ski.

My second comment is that the security is quite serious.  With many heads of state wandering around, this should not be a surprise, but it is different to a ‘bog standard’ real estate conference, where it is difficult to figure out who would care enough to try to disrupt events. My third comment is to say that all of the discussions at the World Economic Forum are under Chatham House rules, so I cannot attribute ideas or comments to specific individuals, as much as it would sometimes add to their impact or context.

Joined a dinner which included many presidents and provosts of leading universities from around the world discussing the future of universities and their relationships with industry, governments and their local communities.  Although the perspectives were different, the overarching theme of greater collaboration with industry, particularly in the sciences and medical sciences, was clear.  Although real estate was not addressed specifically, the anticipated and actual corporate spin-offs from the universities was an explicit objective of better collaboration.  This reinforces in my mind the sometimes underappreciated real estate opportunities that result from universities’ research activities, be they medical office buildings, laboratories, office buildings, housing, etc.

Acted as a discussion leader in a group session on the funding of real estate, infrastructure and natural resources.  The group included many institutional investors from around the world, as well as real estate and infrastructure managers and private equity players.  Broad agreement that  banks have been retreating from lending to real estate and infrastructure in most parts of the world, as a result of regulatory requirements and their own balance sheet constraints from prior real estate lending.  Lending appetite is recovering best in the U. S., is spotty in Asia and remains weak in Europe.  One of my perspectives is that real estate debt in Europe is the best risk adjusted investment in the world, and this was broadly  consistent with everyone’s views.

The major institutional investors are much more able and willing to make large investments in infrastructure, and sometimes in real estate without a manager, by clubbing together.  For infrastructure investments that have been derisked, investor appetite is almost unlimited.  Agreement that investments with some risk are more challenging to fund, although some saw signs that this risk averse position is thawing.  The institutional investors at my table were clear that they liked the silos inherent to the approach of most real asset investors, as it allowed them to invest in between the real estate and infrastructure teams to find mispriced assets.  Discussed real estate and infrastructure investing in Emerging Markets and agreed that the major risks were political, not related to real estate or infrastructure.  The critical need is to have excellent local teams that can help understand the social compact in the community and can therefore derisk an investment

That is all.  It has been an invigorating day, but as one can get no satisfaction in only one day, we have three more days to go.

All the best,

Jon

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Categories: World Economic Forum 2013

First conference session this morning is a lively debate on the current Global Financial Context, designed as the curtain raiser for the ‘Resilient Dynamism’ agenda here in Davos.  The Swiss deal very well with icy conditions outside, but inside this packed room the risk of bruising comes more from the extraordinary number of large camera lenses.  The world’s media are here in force.

We hear UBS chairman Axel Weber get the ball rolling with a strong plea for standard global regulation of the financial sector.  Prudential’s CEO Tidjane Thiam feels this is highly unlikely to be achieved, pointing out that the financial sector is at very different stages around the world, especially in emerging markets where it is long-term infrastructure finance that is driving expansion.

Those camera lenses are on full alert as Jamie Dimon, JP Morgan Chase’s CEO, takes centre stage talking up the positive role played by banks in good times and bad.  He says banks are not a ‘fair weather friend’ and are there for everyone, including nations.  Dimon argues for less regulation, but accepts that good regulation is vital.  Weber contrasted the US view on the debt ceiling – they think it has to be removed, once it bites – with the view in Europe where politicians are being forced to bring down unsustainable debt levels to the benefit of future generations.

Moving on to a session on The Evolving Role of Business, it is interesting to hear Richard Edelman – head of the Edelman PR business – talk about trust.  His view is that the public has lost trust in leaders from all walks of life – sports, politics, business.  All the panellists agreed on the need for companies to integrate more with communities, playing a more positive role.

Time for one more headline session this morning, especially relevant for the EMEA region.  Russian prime minister Dmitry Medvedev takes to the conference platform to state Russia’s aim to be in the top 20 list of countries in terms of ease of doing business.  It’s another pro-globalisation theme, already a strong undercurrent in every presentation we’re hearing at Davos this year.  Medvedev sees clearly the vital importance of increasing transparency and removing obstructions to cross-border investment flows.

A new Jones Lang LaSalle research report, released today as our own contribution to the debates at Davos, will also highlight the strong continuing trend towards globalisation.  The Advancement of Real Estate as a Global Asset Class sees investors rebalancing their portfolios towards real estate as they pursue yield in a low interest rate environment.  It’s an insightful piece—I hope many of the delegates here will find it essential reading—same goes for those people with the giant camera lenses.

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Categories: World Economic Forum 2013

On the train from the Zurich Airport to Davos, thinking that it would be a scenic way to get between the two.

I hadn’t really focused on the fact that we need to change trains twice to get to Davos.  It is a good thing that I figured it out before I ended up in Geneva! It is also dark at 17:30 and so the view is limited!  Who knew?

The World Economic Forum in Davos should be fascinating.  For those of us in the property industry, we are not short on conferences.  There seems to be a conference on any given day on any topic that you can imagine.  I have received more emails recently than I can count on investing in real estate in Colombia.  I am expecting to receive notification of a conference on how securitisation can fund the reconstruction of Somalia any moment now.

This is different.  First, there will be a limited number of real estate people. In their place will be business, political and cultural leaders from all over the world.  Thus the biggest difference will be that the perspective will be broad; not limited to a specific region or aspect of the property industry.  Consequently, it should provide us lucky attendees the opportunity to get a multi-dimensional sense for the mood of the world and the concerns and prospects for 2013 (note to organisers:  It would be helpful if you held this before I, like many others, had to submit our 2013 business plans).

This is my first time at the World Economic Forum in Davos.  I attended one of the World Economic Forums in Cape Town several years ago. It was interesting, but, not surprisingly, presented primarily an African perspective on events. Although a strong African contingent is expected here in Davos, many attendees from Asia, Europe and South America are also expected.  Mongolia catches my fancy as I write.  I intend to search out some of the Mongolian delegation.

Lots to look forward to over the next few days.  You will be hearing from me.

All the best from the second train to Davos (not the last train to Clarksville).

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Categories: World Economic Forum 2013

Another go at the World Economic Forum at Davos. While driving down into the snowy mountains, I have to say that I’m really looking forward to getting the tone of this year’s conference.

Personally, I think the world, and especially Europe, is in a better place than a year ago.

Still, many of the issues the world has to struggle with have no easy fix, and that is certainly true for the challenges within the Eurozone. Politicians need to keep a balance between doing the necessary structural reforms without losing the confidence of the people. We have seen in some Southern European countries more reforms over the last 12 months than in the decade before.

Today I heard on the radio that Greece overachieved on its budget savings target in 2012. Well, who would have thought that 6 months ago? Democracies may sometimes be very slow to react, but once they get going, the trends tend to be sustainable. I hope that all the European representatives at this conference will do their share to support the more positive momentum which we have seen over the last couple of months.

We need to stand together – and that includes our friends from the British Islands – to foster the European position in the Global Economy.

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Categories: World Economic Forum 2013

This is my first time at the World Economic Forum in Davos, and I got my first sense of the scale of the event when I realised that virtually everyone on my busy flight from Singapore to Zurich last night was going to the same small town in the mountains.

Eighteen hours after leaving home I arrived here. It’s snowing. Everything is organised with typical Swiss precision – like clockwork. After registering I rushed off to my first client meeting and am now heading off to another before dinner. I need a coffee.

I’m beginning to get a sense of the business sentiment here, but I think I will reserve judgement until tomorrow, once I’ve had a good night’s sleep and met some more people…watch this space!

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Categories: World Economic Forum 2013

I’m making my way from client visits with our Swiss office in Zurich up to Davos for the start of the 2013 World Economic Forum. Business, government and media leaders from around the world are gathering there to discuss major business issues and opportunities.

This year is the firm’s sixth at the WEF, where I’ll be joined by three of our own leaders: Alastair Hughes, CEO of Asia Pacific, Christian Ulbrich, EMEA CEO, and Jon Zehner, Global Head of LaSalle Investment Management’s Client Capital Group. Throughout the week, we’ll use this blog to describe our activities and share our thoughts about the sessions we attend, the mood, and the people we meet in Davos.

Our expanded presence results from the firm’s ‘promotion’ to the level of WEF Strategic Partner. This distinction is reserved for 100 leading organizations which have been recognized as leaders in their business areas and have earned the respect of the global community. The main benefit is that we can send more people and increase our business networking opportunities.

The four of us share two common objectives for our presence at the meeting. First, we’ll renew or build relationships with very senior members of management at some of our top corporate and investor clients. For LaSalle, that covers institutional investors and the newly emerging and important sovereign wealth fund clients. We’ll also connect with government officials from different regions of the world, and Alastair in particular has some agendas to pursue there.

Second, because Davos attracts such a high concentration of leaders in all fields for one week each year, we will look to gain a sense of their collective outlook for 2013. Are confidence levels rising among this group, for example? If they are, that will be useful confirmation that our corporate clients will be more likely to take space and that investors will be increasingly active. That will in turn confirm our own growth plans.

We will also share Jones Lang LaSalle’s views on increasing investments in real estate, the subject of a research paper you will find on the home page of our Davos website. The site will be home to ‘all things Davos’ during and after the meeting.

Before heading out in different directions tomorrow, Alastair, Christian, Jon and I will meet for dinner tonight to share final plans for the week. There’s much more to come, so look for blog entries from all of us throughout the week.

We look forward to conversing with you in the coming days, and feel free to share our thoughts with your friends and clients.

Best regards,
Colin

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Categories: World Economic Forum 2013