What you need to know in key markets around the globe
Experts See Multi-Year Recovery for Spanish Real Estate
MADRID—Core European commercial real
estate markets, such as London and Paris,
have witnessed improving activity levels
throughout the first quarter, according to
global experts. Certain secondary markets,
however, that took the first hit at the start of
the financial crisis are still struggling with
massive deficits and diminished economies.
Take Spain, for instance. While it has a
relatively low debt load compared to its foundering neighbors—Greece, Portugal and
Ireland, Spain’s weak banks and high unemployment have taken a toll on its economy.
Standard & Poor’s downgraded the country’s
sovereign debt, citing the likelihood of continued sluggish economic growth.
Spain’s fall was one of Europe’s most spec-
tacular. “Spain had become the darling with
perceived wealth,” says Steve Collins, manag-
ing director of Jones Lang LaSalle’s
International Capital Group. “But the banks
were lending to everyone, and it came crash-
ing down when the markets turned south.”
A first quarter Bank of Spain report esti-
mates that banks have nearly $81 billion of
real estate assets on the books, and this fig-
ure could potentially get as high as $223 bil-
lion. “Exposure to the construction and
property development sectors implies a sig-
nificant risk for the Spanish banking sys-
tem,” the report said.
TOKYO—GE Capital Real Estate International
has promoted Francois Trausch to be
chief executive officer, Asia Pacific.
estate brokers formerly
with DTZ Barnicke
have joined Avison
Young. Gord Cowan
and Stephen Yu are
now vice president and
retail specialist, respectively, in the Toronto
North office; and
Darren Clare is senior retail consultant
in the company’s Ottawa office.
For more executive moves, please visit
Taking a Global Approach to Investment
Our latest global investment outlook forecasts a 30% increase in
activity this year to $478 billion. This could improve if the economic
recovery remains on track, but there are, of course, still plenty of
hurdles to overcome.
The case for purchasing core product in key
markets is easily made and competition to buy
in these markets is quite high. This may help to
fill hotels in Paris,
and New York, but
it won’t drive the
increase in market activity our research suggests is possible. So where will investors look?
For the opportunistic, the answer is easy: if
the price is right, virtually any market can offer
opportunities and a range of motivated sellers. For core investors,
however, greater selectivity is clearly still needed.
In Europe, risk-averse players will be slow to leave the larger, liquid markets of the United Kingdom, France and Germany. But
Nordic markets should pick up, as should others such as the Italian
and Dutch, particularly for retail. In general, core, modern retail
and logistics should be preferred but supply-constrained office markets also offer potential, driven by yield compression in the short
term and rental growth in 2011 and 2012.
By David Hutchings
In the Americas outside the US, Canada has emerged from the
downturn as a good target for global diversification, but competition
for core assets will be strong. Brazil has also come out of the recession as a stronger candidate for global investors. Class A office looks
attractive, whicle hospitality, residential and retail offer potential.
Asia, meanwhile, offers a range of mature and emerging possibilities. Cities such as New Delhi, Mumbai and Bangalore in India,
Beijing, Shanghai and Hong Kong in China as well as Sydney,
Australia and Seoul in South Korea appear poised for businesses
expansion, with growing confidence boosting real estate demand.
Japan is also looking more compelling with a relatively high spread
between yield and finance cost.
Overall, with more forced and opportunistic sellers, an increase
in public-sector sales and potential in debt as well as equity instruments, investors should find a growing array of options open to
them. However, to fully appreciate what the market has to offer, they
need to set aside old ideas of what constitutes a mature and emerging market and focus on the reality of today’s environment.
The views expressed in this column are those of the author and not
necessarily REAL ESTATE FORUM.
David Hutchings is the head of European research for Cushman & Wakefield
in London. He may be contacted email@example.com.