CBRE Global Investors, the world’s largest real estate investment management firm with $87.6 billion in assets under management, will switch this year from being a net seller in Europe to being a net buyer, according to the firm’s regional chief investment officer, Will Rowson.
The firm announced today that it transacted deals in Europe valued at €3.2 billion last year. That total included €2 billion of exits and €1.2 billion of acquisitions made on behalf of its institutional clients. However, Rowson told PERE that the firm expected to reverse the trend in 2014. He expects CBRE Global to transact €6 billion of deals in Europe this year, predicting that two-thirds of those would be acquisitions.
Referencing this prediction of increased activity, Rowson said: “The world has slowly but surely woken up over the last two years, and this is a reflection of that.”
Rowson said CBRE Global’s net seller status in 2013 was down to two factors. One of the factors was a natural conclusion to a number of its closed-ended investment vehicles. The other factor was a reaction to Western Europe’s core markets becoming overheated.
“We’ve had some very prime assets that have been getting absolutely premium pricing,” Rowson said. “As it fits with the strategy of our clients, we are advising to them to take that pricing.”
Rowson stopped short of calling the market in regards to core real estate in Western markets, but he added: “Net yields are comparable with 2006 pricing.” He noted that particularly is the case in markets like London, Frankfurt and Paris, where prime yields are little higher than 4 percent and, for certain trophy assets, below 4 percent.
As a result, CBRE Global will be steering a number of its clients to focus on higher risk and return core-plus and value-added strategies in 2014. “That can take all sorts of forms, ranging from us doing a lot of work on an office in a market like London to simply leveraging up a retail asset in a market like Italy,” said Rowson. “You’ll see us doing more core-plus and value-added investing. That might involve refurbishing and fixing assets and then selling them on, or it might involve us identifying assets where the rent is too low and there is scope for fixing that.”
Rowson reiterated that CBRE Global would unlikely offer its clients opportunistic strategies in Europe anytime soon. However, he said a number of the funds under management are adopting an opportunist approach in acquiring property outside of the region’s most popular countries and buying in secondary locations in those countries. For example, he predicted Italy and Spain would figure more prominently on the radars of the firm’s investors.
In addition, Rowson said CBRE Global has been actively encouraging its Asian investors to consider properties outside of these markets too. “We have slightly backed away from Central London, for instance, as [Asian investors] have cash-on-cash return expectations and you cannot match those in Central London now.”
CBRE Global’s real estate investment team in Europe is led by six country heads, a team rounded out with the recent hire of Alain de la Belliere in France.