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Trends 2007
The return of optimism

By Andreas Schiller
February 2007

Throughout the world, capital is on the lookout for investment opportunities. New markets and market segments offer interesting opportunities. The finance and real estate world are merging. The trends of the past year will continue to grow in 2007.

The real estate market has not performed this well in a long time. 2006 was a record year worldwide, as well as in Europe and even in Germany. It is difficult to calculate the total sum of worldwide real estate investments; however, real estate experts have reached a consensus that it is roughly worldwide at least 750 to 850 billion US Dollars — direct and indirect investments together — moving towards the four-digit billion range.

This figure breaks all records. Cross-border investments are a significant component of the worldwide activities. Jones Lang LaSalle has thus estimated that in 2006, roughly 200 billion Euros flowed into European markets, of that roughly 50 billion Euros in commercial real estate and another roughly 30 billion Euros in residential real estate into Germany.

 

Source: Jones Lang LaSalle; Property Data, KTI; Real Capital Analytics; Date: October 2006




 

Next to progressing internationalisation, the trend towards real estate as an investment product and/or investment class will also continue and strengthen in 2007. Enormous demand naturally requires the right products in right location. “Too much capital, not enough products”: This statement could be heard time and again last year, and in some locations, this grievance will be heard this year. Meanwhile, however, project developers have reacted to this complaint and are bringing new products to the market — in part even without preleasing — or are giving existing structure a higher value through refurbishment.

Heterogeneity of investors and locations
Sellers are coming across classical institutional or private investors less and less, and are being confronted with a very heterogeneous investor community that is characterised by a number of investment vehicles and strategies. In the German market alone — next to both classics, open real estate funds as well as closed-end real estate funds — (mostly listed) real estate companies and special funds for institutional investors have gained importance. The real estate industry is awaiting the introduction of REITs in Germany in 2007. In France, on the other hand, open real estate funds entered the market for the first time last year, and Great Britain is discussing these classic investment vehicles.

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