Real estate investors open banks in offices in anticipation of European recovery

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  • Insufficient supply to support the European office market
  • Post-Pandemic Work May Increase Space Demand
  • Europe is ahead of the US and attracts US investors

London, 6 July (Reuters). Real estate investors say COVID-19 vaccinations will begin after more than a year of working from home and demand for office space in Europe will grow as people return to work. I’m sure.

Global office rents fell 31% in the first quarter from last year, according to real estate broker JLL, but Europe was more resilient than the United States.

“The idea that the office is out is complete nonsense,” said Keith Breslauer, managing partner of European real estate investor Patron Capital.

“No one believes this in money wise.”

One day last month, Breslauer reviewed three new proposals for the development of an office in a provincial town in the United Kingdom. “We weren’t alone,” he said.

The long-term impact of pandemics on operating mode remains unclear.

Banking company HSBC (HSBA.L) Consulting company Deloitte told British employees that they can work wherever they want, while planning to halve the world’s real estate. US banks such as Goldman Sachs. (GS.N) And JP Morgan (JPM.N) I ordered the employee to return to the office. read more

“Some will grow, some will shrink, and some will not change at all,” said James Cole, head of private real estate group Cohen & Stairs and US investment manager. (CNS.N)..

“As a result of the recession, we always offer the best investment opportunities.”

The growth in hybrid work is offset by the need to increase office space per person during periods of social distancing, from the office a few days a week and the rest at home, Cole said.

According to investors, the supply shortage ahead of the pandemic is supporting prices, even if companies require 20-30% less floor space.

Simon Martindale, director of Mayfair Capital, said the property manager is setting up a large regional office to allow the UK to “big companies” looking for additional space.

According to analysts and brokers, the pandemic has hit large European companies more than initially expected, with strong government support, and most of them continue to pay rent.

Matthew McCauledjay, director of global research at JLL, said American centers like San Francisco and New York are not very resilient. Probably because venture and private tenants cannot enter into new leases more than multinationals.

According to brokers, the pandemic has led to a decline in investment transactions. However, when the deal took place, according to Real Capital Analytics, office prices in Europe’s CBD rose 13% between 2020 and 2021, while comparable US trading prices fell.

According to industry sources, US real estate investors are increasingly interested in Europe.

“Many foreign investors are willing to come to London to quarantine to inspect construction and conduct tenders,” said real estate broker Savills.

Kennedy Wilson Listed New York (KW.N) Last week I bought an office building near the US Embassy in London for $ 252 million. That’s more than the roughly $ 222 million announced for the building’s sale, which was canceled in 2019.

PLACE, PLACE

The “double storm cloud” of Brexit and COVID-19 is disappearing, said Madison President, real estate investor Ronald Dickerman.

Madison, capital and county investor (CAPCC.L)Last month, the owner of London’s Covent Garden shopping district bought a minority stake in the 37-story Salesforce tower in the city’s financial district.

RE Capital plans to spend up to £ 150 million ($ 208 million) on offices in central London this year. Last year I bought a building in Westminster near the British Parliament.

“Looking at the supply of results over the next few years, it is very limited,” said Simon Banks, UK real estate director at RE Capital, adding that “location is more important than ever.” It was.

Employees may prefer to be near major train stations, for example, because they pay attention to buses and subways.

David Greenbaum, CFO for CPI Central Europe, said the pandemic has not changed his approach to offices, which account for more than 50% of his portfolio.

Employees who were enthusiastic about working from home last spring are now missing out on learning and collaboration opportunities, and his desire to work from home is likely to diminish, he said. “The pendulum is always shaking.”

He added that in cities such as Berlin, the vacancy rate remains very low, which supports the market.

According to CBRE, rents in first-class offices in Berlin in the first quarter increased by about 2% year-on-year, in Paris by more than 5%, but in London’s West End remained stable. In the heart of New York, where there is a lot of free space, rents have fallen by more than 5%.

Warehouse worries

Investor interest in offices is growing as logistics (warehouses) start to look expensive.

“In five years, the profitability of logistics fell by 300 basis points from 7-9% to 4-6%. It is very difficult to make money in this area, ”said Breslauer of Patron Capital.

Logistics companies are struggling with last-mile shipping costs and are encouraging trends such as Amazon Fresh Stores pick-up points and fast grocery delivery services in small urban distribution centers.

These changes and a return to regular buying could affect the sector.

“Chasing one asset class is a lot of money,” said Zachary Gauge, a European real estate analyst at UBS.

“Logistics is a bit of a concern.”

(1 dollar = 0.7224 pounds)

Caroline Korn Report edited by Rachel Armstrong and Catherine Evans

Our criteria: Thomson Reuters Trust Principles.

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