C&W INVESTOR UPDATE
Få har bredere og mer omfattende kontakt med transaksjonsmiljøet for næringseiendom i Europa enn James Young. I denne sommerkommentaren forteller han at transaksjonsmarkedet tar en fot i bakken for å få oversikt over de turbulente makroforholdene og hvilken betydning de vil få på litt lenger sikt.
Av James Young, Head of Investor Services
Cushman & Wakefield i Europa, Midt-Østen og Afrika
Young slår fast at vi har forlatt tiden med ultralave priser på kapital. Til tross for turbulente tider har ikke transaksjonsmarkedet stoppet opp, men det er et langt mer selektivt marked nå. Logistikk og «life science» fortsetter med skarp prising og det er økt fokus på utviklingsmuligheter med færre kjøpere enn det var bare for kort tid siden. Prognosene tyder på at vi kan se hva som befinner seg etter rentetoppen når vi alle er tilbake fra ferie (september). Med justerte forventninger og fortsatt høye priser, vil vi få flere selgere på banen (vår oppsummering basert på artikkelen under).
Hele artikkelen følger her:
Investors have paused to take stock of the multiple factors which have arisen since the start of the year, in particular the war in the Ukraine, accelerating inflation, earlier than expected interest rate rises, and the return to the office and ‘normality’ after the pandemic. However, while market conditions have quietened somewhat from a very busy start to the year, it is too early to determine if this signals an end or just a pause in the market’s post-Covid recovery.
Most economic forecasters suggest the worst of the current situation could be behind us in Q3, with GDP and inflation returning to previously expected levels by the end of 2023. The margin of error on these forecasts has, however, increased and interest rate hikes are not expected to reverse unless the economy does slip into recession. Hence, at the very least, we have moved away from the ultra-cheap money environment of recent years.
This, on its own, should be enough to trigger an adjustment in strategy and pricing. It has not stopped the market in its tracks – deals are continuing, and buyers remain keen to find the right opportunities. What has changed is the selectivity applied to determining what is the ‘right’ asset and a greater nervousness over taking development risks given the escalating cost of construction.
That said, conviction plays such as Logistics, Living and Life Sciences continue to attract new capital and keen pricing and bidding – just with more focus on underwriting growth potential and in some cases a thinner queue of buyers. In other sectors, an adjustment in pricing has been seen or is expected, reflecting the increased cost of debt as well as uncertainty over value. This is typically running between 5% and 10%. However, for quality real estate in all sectors, modern supply is limited, and new development will be held back, putting future pressure on rents.
So, while it is true that the froth has been blown away from the market, dry powder remains at exceptionally high levels, alternative investment segments are facing similar or greater risks and interest rates are still low by historic standards. As a result, assuming current economic forecasts are largely correct, as we see more clarity emerging over the summer, a pick-up of activity is likely, just with a more focussed investment strategy. And, more positively, that adjustment in strategy and peaking in pricing should clearly signal a time to sell for some, leading to more stock coming to market and more activity in what could yet be a busy end to the year.