EMEA is not out of the woods yet: growth looks likely to remain low and volatile and performance will be very diverse market by market.
However, improved stability will breed greater confidence in occupier and investor markets, and activity is expected to improve, with a 5% increase forecast for investment.
A lack of product and affordable finance will restrain activity in the short term, but stock from banks, the public sector and corporate owners will create more opportunities.
North and West Europe will continue to outperform the South. Eastern markets will be mixed, but Russia and Turkey will see strong growth and other emerging markets will be favored by cost-conscious occupiers and yield-hungry investors.
While core markets will remain in high demand, their boundaries will expand over the year.
The funding gap is very slowly being filled by new lending sources (including capital from the Americas), but remains an area of opportunity for investors.
Occupier markets will see limited net growth, but more replacement, improvement and consolidation-driven demand that focuses on efficient space and underpins a modest return of rental growth in under-supplied prime markets across all sectors.
Asian investment sales are almost half of global totals, driven by domestic demand and land sales. Volumes are forecast to rise 15%-20%, while stimulus measures, infrastructure investment, export growth and retail spending will drive modest rental growth and some degree of yield compression.
High liquidity will boost the Asian market this year, but increased diversity between regions and sectors will remain the story, as more modest levels of growth become the new norm.
Investor demand will continue in core markets in Australia and Japan for risk-adverse foreign players, increase in China, and also broaden to other areas such as India, Malaysia, Indonesia and Vietnam for those seeking growth.
As global banks follow regional banks in expanding, office demand will get a boost in major gateway cities.
Retail markets will experience strong turnover growth and retail brands will increasingly be impacted by trends such as urbanization and globalization.
Logistics may be the hottest sector overall, with strong demand and investment activity in key hubs such as Osaka, Tokyo, Shanghai, Hong Kong and Singapore.
North America's strong sale growth has been driving global totals. It will be a favored market for investment in 2013, with a 15%-20% volume increase forecast for the U.S. and Canada – the region's key drivers
Mexico may again outperform expectations, although Brazil will see more of the spotlight as event-driven infrastructure is developed.
Construction activity is rising in multifamily and in select office and industrial markets. Investors remain focused on multifamily and gateway office markets, followed by prime retail and industrial markets.
Modest cap-rate compression is anticipated, led by the better assets in second-tier markets as investor risk tolerance grows and finance availability improves with the CMB market rebound.
Investor strategies for the U.S. are likely to include buying vacancies in top-tier markets or acquiring top-tier assets in secondary markets, with select new construction in the tightest markets. In Canada, development may be a favored route.
Expect the securitization market to again become an active source of financing for large assets like malls and office towers, as well as for commodity real estate in secondary markets. With strong appetite for "B" piece buyers, CMB volume may reach $100 billion in 2013.
With many peak-pricing debt maturities scheduled to occur in 2013, expect the debt markets to be active. Mezzanine financing and preferred equity growth will help "fill the gap" between proceeds available through new senior loans and existing debt.
Bank of America
NY, NJ, MA, U.S.
Services Used: Capital Markets, Corporate Occupier & Investor Services, Leasing
Three Landmark Transactions
Bank of America (BofA) is one of the world's largest financial institutions, serving clients through operations in more than 40 countries. In evaluating its real estate needs in light of a 2010 downsizing and expense management effort, BofA undertook an initiative to sell non-core business units and assets that did not support its strategy, thereby strengthening the balance sheet. “Real estate ownership was not a core business for Bank of America," according to a bank spokesperson and it looked to Cushman & Wakefield to assist them in selling a number of properties and repositioning the occupancy in its leased portfolio.
In 2012, Cushman & Wakefield teams from Corporate Occupier Services, Investment Banking, Commercial Leasing, and Capital Markets collaborated in the completion of three noteworthy transactions on behalf of BofA in the Northeast – each of which represented a top transaction in its respective market.
Cushman & Wakefield and Merrill Lynch orchestrated the sale-leaseback of a 1.8-million-square-foot, 540-acre corporate campus in Hopewell, NJ. The transaction incorporated a unique fee ownership structure, involving four investors in a joint venture partnership. The transaction represents New Jersey’s largest-ever, single-asset suburban office transaction for 2012 – in terms of both size and dollar value.
In Midtown Manhattan, BofA was interested in right-sizing its operations and creating additional efficiencies. In a process that began in 2010, Cushman & Wakefield was able to capitalize on a tenant-favorable Manhattan real estate market to craft a compelling renewal vs. relocation strategy for BofA. The 2010/2011 economic environment had made most companies, especially banks, hesitant to bear the costs of relocation. By engaging the market early, Cushman & Wakefield was able to create significant leverage for BofA to secure a 489,316-square foot-renewal at 114 W 47th Street, while preserving BofA’s long-standing relationship with the landlord.
In a disposition that was one of the largest office transactions in the U.S. and the only downtown office tower sale in Boston, our teams assisted the bank in the sale-leaseback of 100 Federal Street, a 1.3-million-square-foot, 37-story class A office tower in Boston’s Central Business District. This transaction was the monetization of a multi-tenanted owned asset acquired through the merger of BofA and Fleet Bank. Bank of America continues to lease a significant portion of the building
Steward Health Care System
Boston, MA, U.S.
Services Used: Capital Markets, Leasing
Strategic Advisory Services Deliver Healthy Results
Community hospital network Steward Health Care System engaged Cushman & Wakefield to address the significant capital needed for various efforts including base building and life safety systems enhancements. Steward’s lease and acquisition activities were reactionary, not strategic, therefore resulting in higher costs to the system and misguided real estate decisions. The final transactions allowed Steward to extract strategic capital from its real estate holdings while maintaining tenancy and control.
Cushman & Wakefield worked with Steward to structure a master lease over the entire MOB portfolio and subsequently marketed the portfolio for sale. Through the master lease structure, we raised over $100 million and helped Steward receive financing for capital improvements necessary for the health system’s portfolio through a monetization to a private REIT. Our Group was subsequently hired to manage the entire MOB portfolio in order to generate operating efficiencies as well as standardize financial reporting. This provides Steward and the new owners with all the tools necessary to manage the portfolio.
Additionally, Cushman & Wakefield has been engaged to assist Steward with all future real estate transactions. Weekly strategic meetings are in place to identify opportunities in the market, manage the transaction activity for the MOB portfolio including negotiations with physician tenants, and implement a proactive approach to all real estate matters.
ECE Real Estate Partners
Services Used: Capital Markets
Largest Trade for ECE Shopping Centre Fund
Our EMEA Capital Markets team, in collaboration with Copenhagen-based Property Partners and RED Property Advisers, advised on the sale of Rosengårdcentret – the second-largest shopping center in Denmark – to ECE's European Prime Shopping Centre Fund for $526 million. Rosengårdcentret covers 110,000 square meters and attracts almost 7.5 million visitors each year. ECE are majority owned by GIC from Singapore, and this purchase is the first time the business has invested in Scandinavia. This transaction shows that there is renewed attention to acquiring assets in emerging markets. Capital flows on a global scale are increasingly driving a new phase of globalization.
"The acquisition of Rosengårdcentret is the biggest trade to date for ECE's European Prime Shopping Centre Fund. The acquisition is interesting for us as it ensures the fund has an even better geographical spread of our investments. It also fits into the fund strategy to acquire leading shopping centers with the possibility of adding value."
– DR. VOLKER KRAFT
Managing Partner of ECE Real Estate Partners
Mexico City, Nuevo Polanco, Mexico
Services Used: Leasing
One of Mexico City's Largest Land Sales
Grupo LAR, one of the largest Spanish developers, decided to sell a piece of land located in Nuevo Polanco. Cushman & Wakefield went to market with an open sales process that included identifying developers that were interested in and capable of managing the scope of such an important investment and engaging in a selection process with the finalists.
Due to the size of the project and the high expectations of our client, the whole process lasted 20 months. Cushman & Wakefield closed a US$100 million deal – one of the largest land sales in México City's history. We considerably exceeded our client expectations.
LaSalle Investment Management
Services Used: Valuation & Advisory
Cross-Border Valuation for Global Portfolio
LaSalle Investment Management is the investment manager for Plaza Global Real Estate Partners (Plaza). Formed in 2012, Plaza invests in large real estate assets around the world. With leverage, Plaza had $1 billion worth of initial buying power and targeted quality long-term investments in excess of $100 million located in the world’s premier real estate markets. Their maiden purchase was the 103,000-square-foot mixed-used trophy building at 23 Savile Row, London UK, which was followed by the acquisition of a 49.5% interest in 521 Fifth Avenue from SL Green Realty Corp.
Managed centrally through Valuation & Advisory in London and utilizing our global platform, our team provides Plaza with quarterly, external valuations for regulatory purposes.
Mitsubishi Estate Company
Services Used: Capital Markets
Sale of London Stock Exchange HQ
Mitsubishi Estate Company (MEC) completed the sale of King Edward Court, 10 Paternoster Square, EC4 to Oxford Properties, the real estate arm of the OMERS Worldwide Group of companies, for $366 million, reflecting an initial yield of 5.3%.
“The enhanced return from this disposal has vindicated our long term approach to investing and developing real estate in the UK. Our continued relationship with the development will remain through our ownership of Warwick Court at Paternoster.”
– HIROYUKI ARIMURA
MEC's UK Managing Director
The 246,000-square foot headquarters of the London Stock Exchange designed by Eric Parry Architects and Sheppard Robson, was completed in 2003 as part of the Japanese developer’s landmark Paternoster Square development. MEC was advised by Cushman & Wakefield and CBRE acted for Oxford on the acquisition. Proceeds of the sale will be re-circulated into MEC’s new and existing UK investment and development pipeline. This shows that firms and investors are allocating long-term investment to where it will yield the greatest return, leading to a faster rate of economic growth globally. Cross-border capital flows are an increasingly important aspect of the global economy.
Samsung SRA Asset Management
Services Used: Capital Markets
30 Crown Place - First Overseas Investment
Samsung SRA Asset Management, through Cushman & Wakefield, acquired 30 Crown Place, London EC2, on behalf of South Korean institutional investors from a fund managed by Hannover Leasing GmbH & Co. KG.
“We are very excited with having found Samsung SRA as a strategic partner. We look forward to working in partnership with CWI to provide the asset management for this trophy building over the next five years.”
– LAURENT RUCKER
Head of International Real Estate of Hannover Leasing
30 Crown Place offers 192,070 square feet of Grade A office space. The deal marks Samsung SRA’s first overseas investment and suggests that international capital flows and wealth transfer are driving a dramatic new phase of globalization. Increasing effectiveness of financial markets is facilitating the flow of trade and direct investments into global real estate assets. The final deal involved a German fund manager, two German banks providing debt, a North American advisor to the vendor plus a consortium of seven Korean LP investors led by Samsung SRA, the fund management arm of Samsung Life. Increased capital flows from emerging market economies are part of a growing trend, suggesting improvements in the global economy.
SÃ£o Paulo, Brazil
Services Used: Capital Markets
Golden Square Shopping Mall
Squarestone successfully concluded a major joint venture with Ancar Ivanhoe (Ivanhoe Cambridge Brazil) for its Golden Square shopping mall in São Bernardo do Campo for $135 million. Cushman & Wakefield acted on behalf of Squarestone.
The Squarestone Brasil transaction is an excellent example of the improving property investment market, which is driving a dramatic new phase of globalization.The successful outcome is testament to our local knowledge of the São Paulo and Latin American markets, where we are the largest player, coupled with our in-depth knowledge of global retail, access to global capital markets and strong client relationships. Ancar Ivanhoe will invest $126 million into the development project in return for a 73.2% stake in the project.