By Keat Foong, Executive Editor
Charlotte, N.C.—Amidst the European sovereign debt crisis, opportunities exist for commercial real estate investors on the continent, according to panelists speaking during a session at the 2012 ULI Spring meeting.
Speakers on the panel, “When Europe Has the Flu,” suggest there are some ways in which the European real estate markets are similar to those in United States: Multifamily is also a strong asset class, investments need to be assessed on a market-by-market basis, and investors are favoring the primary markets.
Charles H. Fedalen, Jr., executive vice president group head, Real Estate Banking Group, of Wells Fargo Real Estate Banking Group, said that it is difficult to overbuild residential rental housing in markets in United Kingdom and Germany, and to build large-scale residential projects. He said his company has also shied away from secondary locations in British Isles, which is seen as consisting of two economies: London and the rest of U.K.
Roger Orf, managing director, Apollo Management International LLP, agreed that residential housing is not overbuilt in U.K. He noted that his company is aggressively buying real estate in Central London, especially rentals. By contrast, there are worries about office and retail properties, especially office properties in secondary markets, said Orf.
Scott D. Malkin, chairman of Value Retail PLC, said that in order to survive as retail brands today, companies need plausible emerging markets and Internet strategies. However, quite a huge proportion of British brands, such as Marks & Spencer, do not have strong game plans in these new markets, he said, noting that there has been a major shift in the way the retail business operates largely because of the emergence of the Internet.
Van Stults, founding partner of Orion Capital managers, the dearth of debt financing in the European markets will be more pronounced in the next few years. Malkin added there will be great opportunities for investors and lenders who can enter and operate in the European markets.
Orf said the disposition of massive amounts of distressed assets held by banks may be limited by the banks’ expectation that values would increase if they held onto these assets long enough. And Orf added it is his opinion there would be a Japan-like “slow slide downward” rather than a sudden crash and disposition of assets.