London leads eight year high in European corporate real estate sales
Some €14.6 billion in European corporate real estate assets were sold in Europe in 2014, the highest number for eight years, with London leading the growth, new research shows.
Over 350 deals were recorded thanks to a continued low interest rate environment and exceptional levels of equity pouring into real estate, according to a new report from JLL.
Since 2012 the number of companies raising capital from real estate assets in Europe has been on the increase, coinciding with a period of rising real estate values, the report points out.
Indeed, in a separate recent survey from JLL some 40% of respondents reported increasing demands from senior leadership to raise capital through the real estate portfolio.
JLL expects this market momentum to continue as businesses take advantage of opportunities to create a property portfolio that better meets their needs whether it’s reusing capital to support business growth, obtaining greater flexibility to aid downsizing or removing unwanted surplus property.
‘Companies are now faced with a once in a cycle opportunity to exploit the best market conditions since 2007. Last year global real estate investment volumes stood at US$710 billion, a level only ever exceeded in the peak of 2007,’ said Michael Evans, head of Corporate Capital Markets at JLL.
‘This momentum has continued into 2015, with an abundance of equity targeting real estate. This presents opportunities for companies with owned real estate to raise capital via sale and leasebacks. Activity has been widespread across Europe involving a range of companies with appetite across a variety of sectors and asset types,’ he added.
The report has identified that traditional office and industrial occupiers across pharmaceuticals, energy, manufacturing, IT and telecoms dominated European corporate sales last year, accounting for 38% of activity.
Meanwhile hotel operators made up 27% of the sales market followed by retail at 16%. The most notable sales were seen in the media and telecoms sector which included the largest corporate property sale of 2014, sold for €680 million in Paris.
In terms of locations, the UK, Germany and France continued to govern the volume of corporate real estate sales, representing 60% of European activity in 2014. This was driven predominantly by the UK, with an 18% year on year increase and almost double the volume achieved in 2008. Spain and the Nordics also featured strongly with 18% of total corporate sales last year.
According to Karen Williamson, associate director for EMEA research, with such a compelling market now is the time for companies to rethink their own versus lease decisions.
‘There are a range of solutions available to companies considering raising capital from their owned real estate. Sales can benefit the wider business by allowing capital to be recycled back into the organisation to support growth and expansion,’ she explained.
‘It can also be used to enable financial flexibility and unlock value from assets as part of a planned exit. With the real estate market so buoyant, now is the time for occupiers of property to raise capital or sell off unwanted problems at attractive pricing,’ she added.