MIPIM 2009: Jones Lang LaSalle’s predictions

After substantial yield compression across Europe, real estate investors are told to track the “behaviour” and “direction” of the markets over the next 12 months before making investment decisions.

Senior executives at property services firm Jones Lang LaSalle made a number of predictions during its annual briefing at the MIPIM conference in Cannes yesterday.

A key theme throughout the briefing was that, rather than yield compression, investors in real estate must track the “behaviour” and “direction” of the markets over the next 12 months before making investment decisions.

“We are in the midst of an unprecedented global economic downturn,” said Nigel Roberts, chairman of research for Europe, the Middle East and Africa at Jones Lang LaSalle.

“The impacts are reaching far and wide into the fabric of our economies, and occupiers of all kinds are impacted. For many, space requirements are on hold, property costs are under pressure and new demand is a rare commodity.”

While some commentators expect the economy to start growing in 2010, Roberts warned: “The immediate future is very much in the hands of our banks and the success of government support.”

Meanwhile Tony Horrell, head of capital markets at the firm, said buying opportunities would begin to emerge this year.

Large western markets where repricing has been significant would attract most attention, while emerging markets are expected to see greater volatility in the short term, but entice investors over the medium term thanks to their lower relative cost base. 

Horrell said London, which was getting strong interest from investors, offered long-term secure income at yields not experienced for some time. Paris was less exposed to the financial turmoil and had a wide tenant base seeking value-for-money quality accommodation. He went on to say that Munich was a stable market with low volatility and lower rental levels than other key European markets.

“Despite not being immune from economic risk, Central and Eastern Europe now has a strong history in outsourcing which should place it in a strong position over the next several years,” he concluded.