Will the rate of cross-border investment continue to accelerate?

March 11th, 2013

david green morganPosted by:

David Green-Morgan
Global Capital Markets Research Director
Jones Lang LaSalle

 

As we approach the start of another F1 season, are there any lessons that the fastest people on the planet can teach the international real estate investment industry?

Driving as fast as you can in some of the most glamorous places in the world is a long way from trying to find tenants to fill your office building in a slow economy, but as the real estate industry heads to the South of France there may be a few things to take notice of.

Cross-border investment into real estate continues to grow and similar to the most successful F1 teams, those that put the time and effort into ensuring they get it right not just in one or two locations but consistently through the season in locations with different tracks, weather and circuits and proving to be the most prosperous.

While owning buildings in London, Paris, New York and Tokyo sounds appealing, to make it work you have to know the ins and outs of every local market quirk.  And when it comes to making a pit stop or refurbishing the building then the team must be well practised and experienced.  Lewis Hamilton may one day be the next high net worth property investor.

 

>> Find out more about Jones Lang LaSalle at MIPIM

Posted in 2013, Capital Markets, MIPIM | Comments Off

Rule Britannia – London rules the waves

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.

Posted in 2012, Europe, MIPIM, Research | Comments Off

Asia Pacific – hot topic at MIPIM 2012

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.

Posted in 2012, Asia Pacific, MIPIM | Comments Off

What about the health care real estate ?

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.

Posted in 2012, Capital Markets, France, MIPIM | Comments Off

Looking ahead for German shopping centre investment

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.

Posted in 2012, Germany, MIPIM, Retail | Comments Off

Another year, and another journey to Cannes for MIPIM

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.

Posted in 2012, Capital Markets, MIPIM, Spain | Comments Off

How about Turkey….high return, low risk ?

March 11th, 2011

Kivanç Erman - Jones Lang LaSalle

Posted by:
Dr. Kıvanç Erman
Director, Capital Markets & Advisory
Jones Lang LaSalle Turkey

As you may be aware, Turkish Real Estate markets have been subdued for the last three years.

Since the beginning of the economic crisis, we have been arguing that Turkey will be able to profit from this turmoil as we are the only country in Europe which did not spend a penny on the banking system. In 2009, when the crisis was much deeper, the Turkish retail sector has seen a net real growth of 20% with projects delayed but not cancelled. Turkish banks had piles of cash and nowhere to put it, therefore we did not have a cash squeeze either. Although our stated prime yield (speculative of course) was 8% for retail & offices, we are ready to bring it down to 7.5% in the first half of 2011 and most probably to 7% at the year end. Thus, in such an environment, it is expected to have a huge interest from the international investor, looking for a high return / lesser risk.

Whilst I arrived in MIPIM with a few spare slots in my diary, inevitably I ended up with no spare time left due to speculative client meetings. I observed a huge demand from international institutions, not only for existing schemes but also for developments as well. This MIPIM, I think the Turkish team met the most possible number of clients, local & international. Zorlu’s sponsorship of the opening cocktail party was a Turkish team success, namely down to our Chairman Avi Alkas, and this was an important event to make people remember Istanbul & Turkey.

It was not only the Turkish team who promoted Turkey but also our Pan- European Capital Markets team, in particular Jeremy Eddy as well as our Retail CEO Robert Bonwell. We all worked together to illustrate to international investors that Turkey has changed and is now similar to a unicorn in that you don’t believe in its existence and it is something you can only dream of. I personally talked about at least five possible deals that we couldn’t have even dreamt of a year ago and this is hopefully a good sign of what’s to come this year.

Posted in 2011, Capital Markets, Turkey | Comments Off

The Russians are coming…… again!

March 11th, 2011

Jeremy Eddy - Jones Lang LaSalle

Posted by:
Jeremy Eddy
Head of European Retail Capital Markets
Jones Lang LaSalle

Thank goodness for that. The slightly conservative event that MIPIM has been over the last couple of years has seen a boost again this year with a much larger Russian contingent. This market has its obvious attractions of strong growth and scalable city markets market. Russia has attracted cyclical investment to date from a limited investor base, however we believe this year will see investors taking significant positions in what is Europe’s most accessible BRIC economy. Similarly Turkey, ULI’s number one investment destination in 2011, exhibits the same growth characteristics and a burgeoning real estate sector.

Both these markets appear to have appeal for return driven investors, however the principal challenge in terms of further internationalisation of the market and real delivery on this appeal, would appear to be to avoid the “all that glitters is not gold” analogy. As we have experienced in these markets the biggest tangible risk is vendor related, with irrational pricing decisions, unappealing ownership structures as well as inconsistency in technical and legal aspects, the reward is clearly not without risk.

However we believe that now is the time for these markets, having missed out during the last cycle. More challenging is the business case for the North African markets, many of whom must have taken up the MIPIM early bird booking form! Many projects in this region are now looking extremely ambitious from a financing perspective however we have been reassured that as things settle in these economies and the outlook becomes clearer, occupiers and developers are poised to take advantage of the latent potential of these underdeveloped markets.

The great news is that we have real strength in Russia, Turkey and indeed the MENA region so wherever the action is we will be there.

Posted in 2011, Turkey | Comments Off

The sun has nearly set on a busy MIPIM

March 11th, 2011

Tim Edghill - Jones Lang LaSalle

Posted by:
Tim Edghill
Director, Corporate Finance
Jones Lang LaSalle

The sun is setting on the croisette in Cannes on the Thursday of MIPIM and so the wind down of the week begins. MIPIM so often sets the tone for the market going into the second quarter, so a positive week is all important.

Happily it has been positive. In fact upbeat. Everyone remains cautious and no one expects improvement overnight, but there is a clear sense of opportunity in the market and a will to find the way to make things happen.

I was at dinner last night with, among others, James Caan, ex of Dragons Den and firmly wearing his Hamilton Bradshaw hat, Tom Bloxham of UrbanSplash, Alan Tripp of LIM, Nick Jopling of Grainger and Nigel Turner of Kier.

So Private Equity, Housing Developer, Institutional Fund Manager, Residential Investor and Commercial Developer with a PFI business. An eclectic, clever and diverse set of Investors, and yet they shared a common view. That there is real opportunity in the market across all their sectors and that whilst the credit markets will remain tight and economic uncertainty abounds, the real estate sector can move forward and that the gathering momentum from last year will remain.

It has been the same all week. Operators like Regus are optimistic about the recovery they are seeing in key markets and looking to expand, people are on the M&A trail again, joint venturing and the pairing of capital to good operators is high on everyone’s agenda and lastly there are new market entrants. Perhaps the most upbeat sign of all.

Certain sectors shine brighter than others, and of course there are contrarian views.

Indeed, we all recognise that this recovery will come with fits and starts. That transactions will remain very hard to close and that capital aspirations and economic reality remain divided, but if the earnest and engaging discussions of the last three days do set the tempo for the market in 2011, then we should all be busy.

Busy making connections. Busy bringing smart capital, good opportunities and the right expertise together. Busy being smart intermediaries and guiding our clients as to how they take the best positions in challenging times for a strong future.

Posted in 2011, Corporate Finance, UK | Comments Off

Sun, Sea, Sand and Real Estate

March 11th, 2011

James Brown - Jones Lang LaSalle

Posted by:
James Brown
Head of EMEA Retail Research and Consulting
Jones Lang LaSalle

What could be better? All in all a good week at MIPIM. Cautions optimism in the air compared to the pre-crash blind optimism that caught so many out.

From an EMEA retail perspective, UK, France, Germany and the Nordics still appear top of investor agendas. However there is no lack of appetite for other EMEA markets, including: Russia, Turkey and even recently troubled North Africa, which for some there is strong belief that once the dust settles significant opportunities still exist.

Warren Buffett said that it is only when the tide goes out that you can see who has been swimming without their trunks on. Well, the tide is now coming back and it is very much ‘back to business’. Availability of debt remains a hurdle and some may not make it back into the water, but those that do are right to remain cautious of where and when to swim.

After a good week it’s time to pack my trunks and head home.

Posted in 2011, London, Research | Comments Off

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