Nabarro Real Estate Seminar (Oct 2016)
Nick and Philip attended the 7th Real Estate Seminar by Nabarro in London on 18 October 2016. Our "takeaway nuggets" are listed below (please bear in mind that these relate to general commercial real estate and not to the hotel sector directly, but do give an indication of how the wider real estate market is reacting to recent events):
- London - yields remain at a historic low, therefore no real change in pricing.
- London - office vacancy rates are low and are likely to remain low as lettings are strong with many good tenants seeking space in London (eg Apple).
- London - over-supply in the office sector is unlikely for the foreseeable future as banks and developers are more cautious today, thus unlikely to be any distressed sales.
- London - rental levels will fall and more incentives are to be offered in future to secure tenants (eg whereby owners might offer 11 months rent-free today, in the near future this may be more like 22 months rent-free).
- Europe - NPL sales picked up in 2012-2016, but banks disposing of NPLs are having to refill their books with new NPLs as the deleveraging of European banks still has a long way to go before its house is in order.
- Europe - there is huge investor demand for real estate product, but very little product available, resulting in low yields. Consequently, investors are looking at more risky assets classes and markets in the hunt for returns.
- Europe - the lack of product is exacerbated by owners who have extended their turn-around periods because they don't know where to reinvest their proceeds.
- Europe - elections in France and Germany and a referendum in Italy are unlikely to affect demand for real estate, unless the AfD becomes a majority party in Germany in 2017.
- UK - areas with an international airport nearby can witness a 20x increase in their business levels because of access to international markets.
- UK - over the last five years increasing levels of investment have been going into infrastructure, a trend that is likely to continue as Real Estate is seen as too expensive.
- GFC = Global Financial Crisis.
- USA - nothing in life is guaranteed. Whereas in the old days one of the surest investments on Earth was a New York taxi medallion, the value of this right to drive a Yellow Cab fell by over 50% in the last year (from over USD1m in 2015 to USD500k today) - and Emily Maitlis thinks Trump may still win!