Five years after the burst of the real estate bubble, international investors are preparing for a new cycle inside the business. The years of record operations in volume and in number of transactions were left behind, but also those years with paralysis in the investing market. This is one of the conclusions of the report “Tendencies of the European real estate market” drafted jointly by PwC and Urban Land Institute (ULI), with impressions of the actors within the market.
(…) The optimism is moderate, although investors see clear signs of improvement in many European markets thanks to the financial restructuring measures led by the European Union. “In 2012, with the crisis within the Euro zone, there was no clear sign of recovery but now, with the change in the structure of the financial market, those actors with assets are ready to place them in the market at suitable prices and offer investors a medium to long term profitability”, Guillermo Massó, partner at Building and Real Estate in PwC, explains.
Those assets awarded by the financial institutions arouse the interest of many different investors. “The big listed companies are very optimistic when it comes to their business perspectives. They are ready to take the maximum advantage of the low cost of capital in order to obtain the assets the banks are getting rid of in their effort of deleverage”, those at PwC explain.
Along with the traditional investors in the sector, such as the big corporations, other actors like international funds, Asian and South American are returning to the market. During the boom they chose another type of products. “The capital is more globalized; the big international investors are nearing the real estate market, as other options such as the sovereign debt are not so competitive and the fear of a drop of prices is disappearing”, the partner at PwC points out.
Nevertheless, investors are very selective when it comes to choosing which type of assets they buy and also their situation. “There are two tendencies, investors core and core plus. The first ones look for good buildings, with a sole solvent tenant; and the other ones are the added value and opportunistic investors, who buy properties in order to increase their value with their management”, Massó comments. The first group, the most numerous one, chooses trade premises and offices in the best locations in European capitals, such as Paris, London and Berlin, as well as emerging cities, like Istanbul. Rentals in prime locations in Germany, France and the center of London “are valued”, thanks to the fact that main international brands, many of them linked to luxury goods, continue with their expansion plans.
Nevertheless, the partner at PwC stresses that the strategy of investors is more and more focused on specific assets and not specific countries. (…)
Although there are figures which may indicate that the minimum level has already been reached, real estate investors will face difficulties to obtain financing for great operations. “Surely, the debt will be available for those who need it”, the report details. “The impression within the market is that the access to financing will not improve because although there are new debt actors, they are still very exclusive, hindering the great volume operations, except for the most important international players”, Masso points out.