London,
27
October
2015
|
11:00
Europe/London

APPETITE FOR CORPORATE ASSET DISPOSALS REMAINS STRONG

CBRE forecasts corporate property disposals to reach €20bn this year

Turnover from corporate property disposals, across Europe, is on an upward trajectory and set to reach €20bn in 2015, according to the latest research by CBRE, the global real estate advisor.

Motivated by a desire to fund strategic change and an increasing acceptance of more innovative financial structures in the marketplace, corporate property asset sales continue to rise. This comes at a time when commercial property investment across Europe is set to rise for the sixth consecutive year after exceeding €220bn in 2014.

Figure 1 European Corporate Property Disposals, 2004-2015

 

 

 

 

 

 

 

 

 

 

 

Source - CBRE Research

Eurozone Breakdown

The last 18 months has seen the UK lead the way with corporate disposals accounting for 29% of the total market, closely tailed by Germany with 22% market share. The UK and Germany remain the dominant force with more than half of the combined market at 51%. This is consistent with the average across the last decade although the UK is slightly ahead of, and Germany slightly behind, its median position. A number of major retail transactions combined with significant Central London and office mixed use disposals underpin the UK total.

 

Figure 2 European Corporate Property Disposals Country Breakdown 2014 - H1 2015

Source - CBRE Research

The Netherlands (9%), France (7%) and Spain (7%) account for just under a further quarter of the 2014-15 market, and the Nordic region for an additional 15%. Other than Spain where recent market share is around its ten year average, southern Europe has been comparatively weak, with Italy accounting for 3% of the market compared with a more typical figure of 7%.

Retail and Industrial Sectors Gain Momentum

Improving economic conditions, falling unemployment and higher consumption growth across Europe is providing a favorable backdrop for the acquisition of retail and industrial assets. In the first half of 2015, collective retail corporate disposals hit €2.2bn almost the same figure for the whole of 2014 at €2.4bn. The industrial sector also picked up, with its 2014-15 market share reaching 14% compared with a long-run average of 9%.

The office sector remains the largest single component of corporate disposals with 38% of all activity in the first half of 2015. In addition, mixed-use buildings now represent 5% of the total market with a turnover of €442 in H1 2015 compared to €100m across the full calendar year in 2014.

 

Figure 3 European Corporate Property Disposals by Sector (million €) 2014 - H1 2015

Source - CBRE Research

 
Richard Holberton, EMEA Head of Occupier Research, at CBRE
“While there are still some investment risks associated with the cohesion of the Eurozone, and the impact of slower growth in China and other emerging markets, capital appetite for real estate remains high. So while corporate property sales across Europe are rising, their share of the overall market has been shrinking. In 2008, during the early throes of the financial crisis corporate disposals accounted for 1 in 5 sales, or 18%, of the total market. This figure was halved last year to just 9%. Behind the raw figures, one interesting shift we are seeing is a greater willingness by corporates to seek short leases in sale-and-leaseback transactions, because of the critical need for flexibility, even though this will dilute the sale price they can command.”
Richard Holberton, EMEA Head of Occupier Research, at CBRE
John Wilson, Executive Director – EMEA Global Workplace Solutions, at CBRE
“Corporate real estate disposals are used as a traditional method to raise capital. At present, low borrowing costs mean the corporate bond market is attractive and on average UK corporate profits have grown by over 4% per year over the last three, meaning retained earnings can fund onward investment. So, new disposal trends are emerging indicative of funding change. These are, companies managing down surplus property assets post acquisition, disposal of older buildings, and advancement of corporate sustainability aims which is often linked to the removal of older assets increasingly executed through structures that allow sharing of proceeds between investor and corporate. In essence, the fact that many transactions are motivated by the desire to fund long-term strategic plans also reflects growing confidence in external market conditions.”
John Wilson, Executive Director – EMEA Global Workplace Solutions, at CBRE