Archive for the ‘2012’ Category

Rule Britannia – London rules the waves

Tuesday, March 13th, 2012

Bill Page - Jones Lang LaSalleBill Page
Head of EMEA Offices Research
Jones Lang LaSalle
 
Last week, in a crowded seminar room, we launched a new research report into the implications of global capital flows into Central London office real estate. The study, commissioned by The City of London Corporation and the City Property Association looks at how global capital has evolved into such a dominant force in Central London and what the implications are for transparency, valuation evidence, trading patterns and development funding.

The office real estate market has always been global but only since 2009 has it opened up to its current extent. Before 2009, in an average year around 45% of deals were acquisitions by overseas money. In the last three years that proportion has grown to 67%. We have never seen such global diversification of investors. We do not think this will change and we do not think it is a bubble: the potential sources of investment out there, from countries both active and inactive, is vast and with a growing and maturing Asian pension fund industry, for instance, is only getting bigger.

There will be implications, the majority of them positive. While domestic investors will be increasingly priced out of the market this may encourage greater interest in areas offering higher returns such as regeneration. There will be increasing global diversification as London further separates from the UK economically. And, most important, global equity will encourage more commercial development enabling London to retain its position as the leading global financial centre.
 
There are 12 “Why London?” factors which demonstrate London’s competitive positioning. But Fadi Moussalli from our International Capital Group, summed it up better than I could. Seizing the microphone he gave an impassioned account of investors’ criteria – “London offers good investment returns, diversification, safety – and will always be first choice. There may be other markets but investors feel London in their minds and in their hearts”. I expect many agree with him.

Asia Pacific – hot topic at MIPIM 2012

Thursday, March 8th, 2012

megan waltersDr Megan Walters,
Head of Capital Markets Research
Jones Lang LaSalle Asia Pacific

Asia Pacific is key theme at MIPIM 2012 this year with lots of interest from Europeans on both investing in Asia Pacific and how to get Asian equity into European projects.

It is great to see first hand the strong presence Jones Lang LaSalle has here, with a stand in the main exhibition area and what is usually descibed as a ‘tent’ on the beach. Tent under sells it considerably. The team here is doing a terrific job shepparding large numbers of clients into meetings in the main dinning area and meeting rooms, keeping everyone fed and watered.

Yesterday, I attended a Japan Breakfast with very interesting key speakers from Mitsui Fudosan and the Ministry of Land, Infrastructure, Transport and Tourism.  Questions from the audience were on Tokyo office markets re-gaining momentum following last year’s difficulties, and there was a positive consensus in the room.

We then had two panels on the wider Asia Pacific picture followed by the MIPIM Asia lunch, hosted by the City of Chongqing with an extensive delegation from the city. I sat between a Taiwanese developer with developments in the Middle East  and a French investor looking to make his first entry into the Asian markets – something we hope to help with.

The afternoon saw a well attended RICS Asia Pacific reception hosted by the global RICS President Ong See Lian. Again there was a big Asian presence and Europeans who have yet to invest in Asia Pacific were interested to find out that we have valuation standards and due diligence comparable to that in thier home markets.

The Asia Pacific theme continues today, with clients expressing great interest in the upcoming Jones Lang LaSalle report China50 – Fifity Real Estate Markets that Matter. It’s an excellent report demonstraing a depth of detailed knowledge on secondary and tertiary cities in China. It’s very well timed to expand on some of the themes in the new World Bank report on China, released this week and looking at Government reforms up to 2030.

For me, the key take away from the week is that real estate markets are increasingly global; and the strength that Jones Lang LaSalle offers to clients is the combination of global reach along with detailed local expertise. Seeing colleagues from around the globe, discussing ideas and opportunities and meeting clients together demonstrates that connectivity, which is key to unlocking opportunities for clients globally and being able to provide the best advice possible.

What about the health care real estate ?

Wednesday, March 7th, 2012

Fabrice LegerFabrice Léger MRICS
Valuation Advisory Director France
Jones Lang LaSalle France

An analyst told me recently that it must be reassuring to own a clinic or a retire¬ment home these days because you know that there will be no shortage of custo¬mers. It’s a cynical outlook but, at the end of the day, relatively true !

Despite this, investors are, on the whole, still attracted to “traditional” service assets: offices, shops or logistics sites

However, some are particularly active and are choosing to invest in actions based firmly in society, working with owners on the scope of their “real estate work tool ”. Consequently, in 2011, four portfolios, three of which had been valued by the Jones Lang LaSalle Healthcare Team, were outsourced for almost 650 million Euros.

Based on my discussions with actors in the market before and since the start of MIPIM, 2012 seems to be moving in the same direction. In fact, some owners have told us that they are envisaging outsourcing and, as a new concept, one investor has put a small portfolio on the market, thereby creating a “secondary market” in healthcare real estate for the first time. We have also noticed the arrival of new investors. No less than five “dedicated real estate funds” are in the process of being set up. Exciting times.

Looking ahead for German shopping centre investment

Tuesday, March 6th, 2012

Anke Haverkamp

Anke Haverkamp
Jones Lang LaSalle Germany
Team Leader Shopping Center Investment Germany

In 2011 the commercial property investment market in Germany was dominated by the retail sector, which accounted for 45% of the total transaction volume of €23.5 billion. 2011 shopping centre transaction volume grew by around 54% to €4.8 billion, meaning that shopping centre transactions accounted for 45% of all retail property transactions. So, what are the main trends on the shopping centre investment market in 2012?
 
Stable prices but little demand in the middle risk segment
We think investor demand for core products will continue to dominate the market. High-quality products will be scarce, so we expect to see either stable or slightly higher prices in this segment. At the same time, demand for Core+ properties remains limited. This is due less to a lack of interest or the non-availability of capital, but more to a prevailing sense of great uncertainty on the market.
 
Sellers in 2012
In 2012 we expect banks to continue to clean up their balance sheets. Core properties are more likely to be sold off in individual transactions. Conversely, it often makes sense to sell value-add or opportunistic properties as part of a portfolio in order to increase the investment volume and optimise both time and resources. Furthermore project developers, will typically continue to exploit the good market environment for sales. It is not yet clear to what extent the German open funds will emerge as sellers. We will certainly see a sale or two on the market based on the fact that open-ended funds are increasingly focusing on active asset management. May 2012 will represent a decisive point in time as four of the currently closed funds will then have to decide whether to reopen or liquidate.
 
Trends among purchasers
The capital structure of large property transactions, which regularly take place in the shopping centre category as well, is becoming increasingly diverse with the development of more complex forms. Equity contributions and alternative financing channels are gaining in importance in this area.
 
Local expertise
Investors have recognised that shopping centres are a very complex product. Against this background, we are increasingly observing that international capital is joining forces with local retail specialists. This is happening in two ways: first, investors identify a suitable product and bring in an established market player early on during the examination phase. This player later takes on the asset management and frequently buys a minority stake in the investment; second, investors participate in project developments that have already reached a certain stage (e.g. pre-lettings, building permits etc.). For players such as ECE, this approach is not new. What is new is that the circle of the local partners has expanded, as have the number and origin of the investors that are searching specifically for these investments. This type of cooperation was first evident on a larger scale at the beginning of 2010, and has continued steadily since then. Local players with very good development know-how will particularly profit from this evolution. In this way they will be able to cover funding shortfalls with the required additional equity.
 
Shareholdings/partnerships
A further trend that is becoming increasingly apparent is the flow of capital from global and European sources that want to invest directly in property, rather than indirectly as in the past, and enter into long-term partnerships. As a rule, they aim to establish joint ventures with equal shares and seek partners that have an equally long-term view. This development opens up interesting possibilities for property owners. Property companies are able to sustain their asset management role and release capital at the same time. A positive side effect is that property investments are also increasingly becoming liquid in Germany, as long as the underlying joint venture agreements fulfil the demands of international and institutional investors. The fact that most sales of investments are not subject to land transfer tax also makes this investment structure very attractive commercially. This has particularly been the case since the land transfer tax was increased in several federal states. All in all we expect a further interesting year on the German shopping centre investment market. Apparently, the market conditions remain good and shopping centre transactions will account for the majority of the complete retail investment volume once again.

Another year, and another journey to Cannes for MIPIM

Tuesday, March 6th, 2012

Andrés EscarpenterAndrés Escarpenter
CEO
Jones Lang LaSalle Spain

I am pleased to report that expectations for Spain are improving primarily to the recent government measures that will see financial institutions accelerate the value adjustment of their real estate portfolios. This adjustment is not only an important economic activity, but a psychological step forward. Combined with the likely closing of the first large portfolio sale of distressed real estate, this should help encourage the market. However, we expect these large portfolio sales to have a very dominant residential component. We do not expect to see large commercial real estate portfolios coming to the market. From a personal perspective, I am keen to use MIPM to hear first hand how “core” investors currently view Spain.
 
I will report back with additional findings and thoughts throughout MIPIM.