The good news is that commercial real estate funds focused on Europe remain an integral part of investor portfolios. Repricing of assets may be occurring, credit conditions are challenging, at best, and investment activity is off significantly. But it remains possible to raise money and launch funds in the current environment even as investors are more selective and cautious.
It is almost a cliché that real estate capital flows have become increasingly global. As transaction volumes surged worldwide — at least until recently — cross-border capital flows have increased even faster. According to Jones Lang LaSalle’s Global Capital Flows 2008report, global real estate investment increased by 8 percent in 2007, to $759 billion (Ä523 billion), but inter-regional investment grew at more than twice this pace, by 20 percent. Foreign investment now accounts for roughly a third of real estate transactions, up from under a quarter just two years ago.
As economies in the United States and large parts of Europe brace for continued slowdowns and as uncertainty persists over the severity and duration of problems in the debt markets, the international real estate industry is in a sombre mood. Ultimately, real estate is a debt-based business, and when lenders curtail their participation, by choice or necessity, the impact is widely felt.
Howard Roth recently took over as head of Ernst & Young’s global real estate practice, based in New York City. Previously head of the Northeast real estate practice of Ernst & Young U.S., Roth has a formal title of global and Americas director of real estate and comes to international real estate investing at an interesting time. Editor Richard Fleming recently talked with him about his new role and how he sees the industry reacting to the circumstances it now finds itself in.