Europe used to be an east/west sort of place, and you knew where you were — you were west or you were east of what was then more or less a fixed, impervious border. Times have changed. Now it has become a north/south kind of place, where the Iron Curtain has twitched away to the scrapyard and haberdashery in the sky and where it’s slightly more difficult to work out whether you’re north or whether you’re south.
From the Current Issue
Despite the presently muted but ongoing euro zone sovereign debt crisis and turmoil in many European economic and political circles, the London office market continues to stand tall as the world’s financial centre. Cautious institutional investors remain focused on core assets in perceived safe, liquid markets, and prime office properties in London are attracting capital from all corners of the globe.
Fundraising in Europe continued to remain active in February 2013, with commitments from investors looking to maximise returns in emerging markets and with core properties.
A number of high-profile deals have transacted in Russia in recent months. Although overall trading volume in 2012 was lower than in 2011, Russia is entering 2013 with a number of major pending and closed transactions.
Transaction volume in the German residential market remains strong in the first quarter of 2013 as investors sell assets in the hope of profiting from buyers motivated by increasing property prices and rental demand.
In one of the biggest portfolio deals of early 2013, IVG has acquired three properties in Germany totalling 38,400 square metres and valued at approximately €500 million. The seller is an investment fund of Freo Group.
Economic growth is set to resume in Denmark this year, following a slight contraction of 0.1 percent in 2012. GDP growth of 0.7 percent is forecast for the year. Consumer confidence is somewhat boosted by steady employment levels, falling inflation, low mortgage rates and an anticipated modest rise in real incomes in the months ahead. External trade is held back by euro zone weakness and a consequent lack of demand in key export markets. Should growth fail to return in 2013, it is likely that the government will step in to support the economy with extra measures.
European investors are still interested in Asia, on diversification and better growth opportunity grounds, but they are being more than matched now in capital flow terms by Asian investors heading for Europe — primarily London — on diversification, safe-haven and limited downside grounds.
The growing number of real estate benchmarks has played an essential role in making real estate a more investable asset class. High-quality data is not only seen as the basis for making real estate more transparent, but also as an important tool for communicating with stakeholders — including regulatory authorities. The availability of more and more benchmarks also means that asset managers and investors have to be more careful in choosing the right one for their purposes. Experts agree that benchmarks shouldn’t be used on their own as a headline number, but rather as a prompt for insight into reasons for over- and underperformance, whether at strategic or tactical levels.
When asked what the 2013 outlook for real estate looks like, it sounds like the easy option to say very much the same as 2012. But the reality is that it is difficult to see how this year will be significantly different from the last. The market is likely to continue to be characterised by risk aversion, the hunt for income and wealth preservation. We believe that caution is the right way to approach real estate investment in 2013, with no imminent improvement in the economic environment anticipated.
Low bond rates and unpredictable equity markets combine to make the role of a pension scheme trustee or pension fund adviser a difficult one, particularly given the demands for more predictable but higher income. The search for alternative sources of income has led to a heightened interest in assets such as real estate that can provide some inflation/liability-linking characteristics.
Editor Richard Fleming spoke recently with Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority (EIOPA) in Frankfurt, about planned changes and improvements to the regulation at EU level of insurance companies and pension funds, and possible effects on the real estate sector.