6 Minutes Read more:* A lack of supply is aiding the European office market* Post-pandemic working may raise space demand* Europe outperforms the US, drawing American investment. Reuters, LONDON, July 6 – Property investors believe that, after more than a year of working from home, demand for office space in Europe will increase when COVID-related regulations are implemented. People return to work after receiving 19 immunizations. According to real estate broker JLL, global office real estate leasing volumes fell 31% in the first quarter compared to the same period a year earlier, albeit Europe fared better than the US. Keith Breslauer, managing partner of European property investment Patron Capital, remarked, “The assumption that the office is over is total rubbish.” “The smart money isn’t buying it.” On one day last month, Breslauer worked on three fresh office development options in British regional cities. “We weren’t on our own,” he explained. The pandemic’s long-term impact on labor patterns is unknown. HSBC aims to cut its global real estate by nearly half, while Deloitte has told its UK employees that they can work anywhere they wish. Employees at American institutions such as Goldman Sachs and JPMorgan have been ordered back to work. “Some will increase, some will decrease, and some will remain unchanged,” said James Corl, the president of Cohen & Steers’ private real estate group. “The best investing opportunities are always found in the aftermath of economic downturns.” In an age of social alienation, Corl believes that the surge in hybrid working — going to the office a few days a week and working from home the rest of the time — is being counterbalanced by the demand for more office space per worker. According to investors, a supply deficit that predates the pandemic is also sustaining pricing, even if enterprises may require 20-30 percent less space. Mayfair Capital fund director Simon Martindale said the real estate management was organizing a significant regional office rental in the United Kingdom for a “huge company” in need of additional space. According to analysts and brokers, the pandemic has harmed large companies in Europe less than initially anticipated, thanks to strong government backing, and most have continued to pay rent. According to Matthew McAuley, head of global research at JLL, U.S. cities such as San Francisco and New York have not fared as well, probably because venture capital and private equity tenants are less able to take on new leases than multinational tenants. According to brokers, the epidemic caused a substantial decline in investment transactions. Prices for offices in Europe’s key business districts, on the other hand, have grown 13% in 2021 from 2020, according to Real Capital Analytics, while equivalent transaction prices in the United States have declined. According to industry experts, US property investors are becoming increasingly interested in Europe. “A number of international investors are willing to visit London and quarantine in order to see and bid on buildings,” said Savills, a real estate brokerage firm. Listed in New York Kennedy Wilson paid $252 million for an office block near the US embassy in London last week, well over the reported price of $222 million for an unsuccessful sale of the facility in 2019. LOCATION, LOCATION, LOCATION According to Ronald Dickerman, president of property investor Madison, the “double storm cloud” of Brexit and COVID-19 is dissipating in the United Kingdom: “We are really optimistic about the UK’s revival and London.” Madison, who owns a minority share in London’s Covent Garden shopping center’s Capital & Counties, bought a minority stake in the 37-story Salesforce Tower in the City financial sector last month. This year, RE Capital aims to invest up to £150 million ($208 million) in central London offices. Last year, it purchased a building in Westminster, near the British parliament. “Deliverable supply in the next few years is highly constrained,” RE Capital’s head of UK real estate Simon Banks said, adding that “location is increasingly more crucial.” Employees may prefer to be near mainline train stations rather than buses or the metro, for example, because they are wary of them. CPI’s CFO, David Greenbaum, said the pandemic had not impacted the company’s approach to the office, which accounts for more than half of its portfolio. Staff who were thrilled about working from home last spring are now missing out on training and cooperation chances, and interest in working from home is expected to decrease, he said. “The pendulum swings all the time.” Vacancy rates in locations like Berlin are still quite low, he continued, bolstering the market. According to CBRE, prime Berlin office rents increased by roughly 2% in the first quarter compared to a year earlier, and by more than 5% in Paris, while the West End of London remained steady. Rents in New York’s midtown plummeted by more than 5% as more empty space became available. WAREHOUSE PROBLEMSAs logistics — warehouses — become more expensive, investor interest in offices is growing. “In five years, logistics yields have decreased 300 basis points, from 7-9 percent to 4-6 percent. It’s quite difficult to make money in this industry “Breslauer, of Patron Capital, agreed. According to insiders, logistics companies are grappling with the price of last-mile delivery, which is encouraging trends like pick-up locations in Amazon Fresh stores and rapid delivery grocery services with smaller city-based distribution centers. These adjustments, as well as a return to normal shopping, could put a stop to the industry’s growth. “There’s a lot of money pursuing a single asset class,” said Zachary Gauge, a UBS European real estate analyst. “I’m a little concerned about logistics.” (1 dollar = 0.7224 pounds) (Carolyn Cohn contributed reporting.) Rachel Armstrong and Catherine Evans edited the piece.)/n
Read More
