Part 2 of 2
CHICAGO—Investors look to Paris because they are getting priced out in London and low interest rates and huge global liquidity is driving ongoing strong demand for German property. Those are a few key points that came out of a recent interview we had with John Homsher, CCIM and a principal of PodolskyICircle CORFAC International based in Chicago who recently attended the Expo Real Conference in Munich, Germany, as the US representative of CORFAC International. Homsher will be president of CORFAC in 2016.
GlobeSt.com: What were some of your CORFAC colleagues saying about commercial real estate market conditions in their respective regions?
John Homsher: Our affiliate in Germany, Berendes & Partner Consulting/CORFAC International, mentioned that the lowest interest rates ever and huge global liquidity is driving ongoing strong demand for German property (which is expected to top 40-45 billion € commercial investments in 2015). The inventory for core products in the seven biggest cities is nearly empty and investors are looking for more risky deals in secondary markets and new product niches like student and micro housing, hotels and senior-living homes. Additionally, Berlin has become a startup capital in Europe and mostly driven by e-commerce in part because it is one of the hippest places on the continent, plus it is much more affordable than London. Berlin got $2.2 billion USD in venture capital in 2014 while London got $1.5 billion USD. Even so, London had more startups last year – 175, versus 115 in Berlin.
Farebrother/CORFAC International in London said the investment market there has never been stronger and it is driven by consistent rental growth. Prime office rents in the West End currently stand around £117 per square foot (approximately $180 USD). There is an interest in a wide variety of properties in London, For example, just last week Farebrother announced over $200 million (USD) in new sale offerings and they include the former London HQ of The English Football Association (which relocated to Wembley), the leasehold of a 100,000-square-foot building on Fetter Lane that has multiple tenants (London HQ of Marriott Hotels is one of them) and The High Holborn Telephone Exchange building (76,000 square feet in eight floors).
In Paris, BG Carré/CORFAC International told me that investors are looking in Paris because they are getting priced out in London – particularly value-add investors who believe they can improve and reposition properties to achieve returns in the high teens. Cap rates are also low in Paris. For example, the investment yield for a recently sold, pre-leased new office development in Boulogne-Billancourt – a suburb of Paris, was sub-4%. Economic growth in France remains low at just 0.5% but is expected to improve in part because new presidential elections are scheduled for May 2017 which may result in a more business-friendly government.
GlobeSt.com: A video on CORFAC's Fall Summit in Minneapolis recently ran on GlobeSt.com and the current president said that you have 10 existing European affiliates and are looking to add more. Having just been to Expo, any update on this initiative?
Homsher: In addition to myself, CORFAC had 16 other attendees at Expo from eight European countries and we sponsored a booth. During the conference we had meetings with independent brokerage firms from Helsinki, Amsterdam and Lisbon, which are some of the markets we would like to add to our network, but it is too early to forecast an outcome. However, my takeaway is there are independent commercial real estate firms in all corners of the globe and despite the size and scale of the big brokerage houses, there remains a place for well-run independent, local and entrepreneurial firms that are seeking an alliance with a global real estate network like CORFAC International.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
