Sense of direction
Direct investment into commercial real estate in Europe for 2008 is down 55 per cent compared with 2007 according to the latest prediction from analysts...
Although some of the fall was due to a decline in capital values and volatile exchange rates the main impact was the credit crunch and the collapse of organisations like Lehman Brothers, according to the latest research from Jones Lang LaSalle.
Its latest report shows that investment activity had already slowed in the first half of 2008, but since the collapse of Lehman Brothers in September, investment activity reduced further.
In quarter four, which is traditionally the strongest quarter of the year, an estimated £14.4 billion of direct real estate transactions was recorded in Europe, down 30 per cent on transaction volumes from the previous quarter.
'The volumes in 2008 are no surprise to those close to the market given the situation in global financial markets, the wider economic slowdown and investor confidence levels. Although we believe that we are through the worst, investment activity will remain low in the early part of next year,' said Tony Horrell, Head of Capital Markets at Jones Lang Lasalle.
Significant changes to global debt markets have fundamentally altered the dynamics of direct real estate investment. 2008 we saw a reduction in activity from all types of investors including institutional investors and listed property companies, German Open Ended funds together with a more cautious attitude from both international wealth capital and private equity inventors.
The impact of falling investment volumes has been Europe-wide, but most pronounced in the UK, Germany and France, where volumes fell by 60per cent to around €60 billion, the report indicates.
However, so far the slowdown in activity has been evident mainly in mature Western European countries. In Central and Eastern Europe restricted investment stock and the suspension of investment activity by some of the Germen Open Ended Funds has led to a slow down in investment activity, particularly in the second half of the year. Despite this area's overall proportion of total European transaction volumes increased from four per cent to eight per cent in 2008 compared to the previous year.
'In today's market, we are seeing a flight to quality and more attention focused on property fundamentals and future tenant demand. The recent correction in pricing is already proving encouraging to some opportunistic investors and equity rich players,' said Horrell.
'In 2009 we expect some highly geared investments to come to the market as banks repair their balance sheets. As a result of quite significant falls in the capital values that we have already seen, markets have moved closer to fair value and will create some excellent buying opportunities in the coming year. The opportunity to acquire quality stock at reasonably acceptable price levels is already beginning to act as a catalyst in some markets,' he added.
Source: www.propertywire.com