Institutional Real Estate Europe

July 1, 2023: Vol. 17, Number 7

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From the Current Issue


The unraveling: Distress in the market — and what to do about it

The long bull market we have all been profiting from finally appears to be unravelling. But a bigger concern is the health of the overall global financial system. Back in 2008, governments around the world spun their printing presses and pumped trillions of fresh capital into the system in order to rescue it. And it worked. It stemmed the bleeding, as Band-Aids often will. But that’s all they were — Band-Aids. The root problems plaguing the industry have not been addressed. Real estate transactions remain private, while the risk associated with financing assets continues to be transferred onto investors, depositors and taxpayers. What is needed is a national — perhaps even a global — database of commercial and residential real estate loans.


Still standing tall: On the seventh anniversary of Brexit, it appears that the United Kingdom’s real estate market has managed to defy the doom-mongers

Under “normal” circumstances, the seventh anniversary of the United Kingdom’s historic decision to sever its membership in the European Union, would be an opportune juncture to assess the impact that Brexit has had on real estate markets and cross-border investment. Over the past seven years, however, circumstances have been anything but “normal” What can be confidently asserted, however, when reflecting on the past seven years, is that neither the best- nor worst-case scenarios predicted during the Brexit referendum have materialised.


It takes a village: Local authorities are toying with the idea of the 15-minute city, but the concept needs cooperation at all levels of society

The 15-minute city reimagines the layout of a city as a series of interconnected self-contained neighbourhoods, where all of the amenities necessary for everyday life — work, shopping, restaurants, green spaces, cultural venues, and so on — are no more than a 15-minute walk or cycle away. Under this system, there is no immediate need to travel long distances or use carbon-based transport, with “hyper-locality” achieving a better work-life balance for all. But how realistic is it? Can an entire city be restructured in this way?


Not as easy as A, B, C: EPC rating variance makes consistent and meaningful evaluations and comparisons difficult to achieve

Despite the EPC rating system’s straightforward scale ranging from A to G, the EPC rating system varies significantly in terms of scope, methodology, assumptions, and rating across different countries, and sometimes even within the same country, as is the case in the United Kingdom and Belgium. This variance makes consistent and meaningful evaluations and comparisons difficult to achieve. As concluded in the European DataWarehouse (EDW) EPCs across Europe analysis, common conversion factors are needed to make sure that an “A” rating in one country corresponds to a similar level of efficiency in the others. This will benefit stakeholders who work cross border, which is a “must” in today’s globalised world.


Investment choices: Differentiating managers and strategies in the current environment

How can investors differentiate among managers? Proven managers that can invest up and down the capital stack and have a tenured team and track record transacting across cycles will be well positioned to find distress and outsized returns. Look closely at the timing of the historical track records, at the team responsible then and now, and at the creativity of the deals that were done to generate the prior track record.


To the rescue: Private equity investors are covering Germany’s current real estate

The constellation of enormous demand for finance and very limited supply in the German real estate market has been closely monitored by private equity investors, insurers and family offices from throughout Europe, the United States, Middle East and Asia. In response to the highly cautious approach adopted by the banks, these actors have entered the German real estate market in larger numbers — often not as buyers, however, but as financiers.


European residential market to remain in limbo in 2023

Catella Residential Investment Management’s latest Markets Overview report says that the wide gap in price expectations between buyers and sellers remains in place in many European locations, maintaining valuation uncertainty. At the same time, interest rate hikes continue to stall investors who rely on financing. By the end of 2022, transaction volumes had fallen sharply in numerous submarkets within the European residential real estate market. The manager expects the general conditions on the European transaction markets for residential real estate to remain tense for the rest of 2023.

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