Hans van Tartwijk 23 February 2012

ULI Emerging Trends

Last week the annual Winter Meeting and Conference of the Urban Land Institute (ULI) took place in Paris. As always, two days filled with great speakers and Professional Panels.

Most attendees were interested in the Market Analyses and Economic Forcasts. Every year, ULI conducts a representative study among Real Estate Leaders and Professionals and presents the findings in Paris. Today I would like to high light some issues for the Project development markets.

Although there seems to be evidence that the investment markets are slowly recovering, the Trend for Project Development markets seems very hard to predict or project. The analists of ULI and PWC in the Study conclude that new development initiatives could start up in 2011 and even as soon as this year:

John Forbes, real estate leader in Europe, Middle East and Africa, PricewaterhouseCoopers, remarked:
“This year there is a sense of cautious optimism. Sentiment regarding investment prospects has stabilised and although sentiment regarding development continues to decline, it is a less dramatic fall than that witnessed last year. The key issue is the occupier side of the equation. Investors are nervous and they are concentrating on the deeper, more liquid markets.”
Paris was ranked third by Emerging Trends in terms of prospects for existing portfolios, edging out London due in part to the general perception that it has a wider economic base and is less dependent than London on the financial services sector. Interviewees pointed to the low level of vacancies in Paris, raising its ratings for investment opportunities and, to a lesser extent, for development.

“Europe’s economic recovery is underway, but it will be sluggish and uneven,” said ULI Europe Chairman Alexander Otto. “We are looking at a crawl back up the hill, and how much values recover will depend on where Europe ends up economically against global competition.”

Investor sentiment regarding London “improved significantly” from 2009, due primarily to a market correction led by an infusion of funds from the Middle East and Asia. The city ranked fourth in 2010 for investment in existing properties and first for new acquisition opportunities. For acquisitions, the main focus is offices, with nearly half the respondents citing that as the preferred asset type. Despite some skepticism over the limited extent of the rebound, some interviewees indicated that they are confident enough about London to make development plans for 2011, if not for this year. “

The first two quotes (in black) show that there seems to be no reason to be very optimistic about the recovery of the Development Markets. Economic recovery is taking place at a very slow pace en could very well have to work it’s way through another dip. This recovery obviously is key for the growth of companies, employment en therefore for the demand for new or renovated office and industrial space. For consumer spending goes the same. Only when consumers have more confidence, they will start spending more.

The presentation had a fascinating Graph about consumer spending and savings. Both European and US consumers are saving more money than ever before. They keep their hands on the wallet and do not spend. And although we all like the perspective of the American consumer saving money, it is quite desastrous for Producers and Retailers. Only when consumers find their way back to the store, demand for retail space will rise and developers’ perspectives will improve.

The time between economic recovery and an increase in Corporate Investment and Consumer spending might easily be a year. And as the doubts about that recovery remain strong, this spending will also be limited in size and growth.

Having said that, the third quote looks rather out of place, doesn’t it?  It is probably the result of a desparate hope for better times with the interviewees. I do not see the signs that support a more positive general perspective for the immediate future.

Should Developers therefore give up hope?  Absolutely not!  General figures and statistics paint a global picture, a statistical trend. They say little about local markets, niches and innovations (The Conference showed that there is an enormous demand for “Green Building Solutions”).

And these are the particular markets in which strong, skilled, creative and professional Entrepreneurs can prove themselves. As I have written in earlier blogs, this is the time to devote yourself to end users. There will always be tenants/users who want new (or renovated, sustainable) space,  if only to house the “after shrink” workforce and save housing costs and expenses.

So: Chase the tenants/users. Staying home will not get you engaged any sooner…

Please visit www.uli.org for the complete report.

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Vorige week vond in Parijs de traditionele “Winter Conference” van het Urban Land Institute (ULI) plaats. Zoals altijd twee volle dagen met uitstekende sprekers en panels.

De aandacht ging vooral uit naar de markt analyses en voorspellingen. ULI laat ieder jaar een groot onderzoek doen onder 300 vastgoedprofessionals en beslissers en presenteert die in Parijs. Vandaag aandacht voor de Projectontwikkelinsmarkten.

Alhoewel er sprake is van een langzaam herstel in de beleggingsmarkten blijft de Trend voor Projectontwikkelingsactiviteiten moeilijk te voorspellen. De analisten van PWC en ULI concluderen in hun jaarlijkse onderzoek dat de plannenmakers in Londen in 2011 en misschien al dit jaar weer naar de tekentafel kunnen:

John Forbes, real estate leader in Europe, Middle East and Africa, PricewaterhouseCoopers, remarked:
“This year there is a sense of cautious optimism. Sentiment regarding investment prospects has stabilised and although sentiment regarding development continues to decline, it is a less dramatic fall than that witnessed last year. The key issue is the occupier side of the equation. Investors are nervous and they are concentrating on the deeper, more liquid markets.”
Paris was ranked third by Emerging Trends in terms of prospects for existing portfolios, edging out London due in part to the general perception that it has a wider economic base and is less dependent than London on the financial services sector. Interviewees pointed to the low level of vacancies in Paris, raising its ratings for investment opportunities and, to a lesser extent, for development.

“Europe’s economic recovery is underway, but it will be sluggish and uneven,” said ULI Europe Chairman Alexander Otto. “We are looking at a crawl back up the hill, and how much values recover will depend on where Europe ends up economically against global competition.”

Investor sentiment regarding London “improved significantly” from 2009, due primarily to a market correction led by an infusion of funds from the Middle East and Asia. The city ranked fourth in 2010 for investment in existing properties and first for new acquisition opportunities. For acquisitions, the main focus is offices, with nearly half the respondents citing that as the preferred asset type. Despite some skepticism over the limited extent of the rebound, some interviewees indicated that they are confident enough about London to make development plans for 2011, if not for this year. “”

De eerste twee quotes geven duidelijk aan dat er eigenlijk nog geen reden is om optimistisch te zijn over het herstel van de markten voor Projectontwikkeling. Het economisch herstel verloopt erg langzaam en zou best nog eens door een nieuw dal kunnen gaan. Dat herstel is bepalend voor de groei van ondernemingen en de werkgelegenheid en daarmee voor de vraag naar nieuwe of vernieuwde kantoor- en bedrijfsruimte. Pas als de werkgelegenheid toeneemt en de burgers méér vertrouwen krijgen zullen ze weer gaan besteden.

Over de consumentenbestedingen werd nog een interessante grafiek getoond. Inmiddels sparen zowel Europeanen als Amerikanen meer dan ooit te voren. Ze houden de hand op de knip en dat zie je terug in de bestedingen. Pas als die weer  gaan groeien zal de vraag naar winkelruimte terugkeren in de markten.

De tijd zal verlopen tussen het herstel van de economie en de toename van bedrijfsinvesteringen cq consumentenbestedingen kan zo maar een jaar zijn. Nu de twijfels over het economisch herstel blijven, zullen ook de investeringen en bestedingen nog wel even achterblijven. Dat is geen goed perspectief.

De derde vet gedrukte quote is dan ook merkwaardig. Ze is waarschijnlijk toe te rekenen aan een krampachtige hoop op betere tijden bij de ondervraagde vastgoed professionals. Ik zie geen aanwijzingen die een positieve verwachting voor de korte termijn enige steun bieden.

Moeten de Projectontwikkelaars nu de moed maar helemaal opgeven? In tegendeel. Gegeneraliseerde cijfers laten een globale situatie, een trend zien. Ze zeggen niets over lokale markten, niches en innovaties. ( Er werd tijdens de conferentie ook betoogd dat er een grote vraag is naar “Groene Gebouwen”" )

Dat zijn de markten waarin sterke, vakbekwame ondernemers zich kunnen bewijzen. Zoals in eerdere blogs betoogd, is dit de tijd om intensief in eindgebruikers te investeren. Er zijn er altijd wel een paar die nieuwe (of vernieuwde, duurzame) kantoor- of winkelruimte willen, al was het maar om de gekrompen organisatie nieuwe huisvesting te bieden of exploitatiekosten te besparen.

Met ander woorden: achter de huurders aan. Als je thuis blijft zitten krijg je geen verkering…

Ga voor het hele onderzoek naar (www.uli.org)