Institutional Real Estate Europe
July 1, 2009: Vol. 3, Number 7Buy For $150.00 Add to Cart
Mixing It Up
Headlines continue to flash yellow, cautioning real estate investors on the perils of investing in both mature and emerging markets. Certainly, the risk-averse attitude that is prevalent among lenders and investors poses a stark contrast to the heady days of 2006 and 2007. This attitude, not to mention a dearth of capital, is particularly troublesome for the development community. Despite the precarious health of banks and a forecast for continued economic contraction across Europe, however, many mixed-use schemes have retained their appeal and appear to be moving ahead.
Asset Values Take a Hit
Real estate investment managers took a broadside hit from the recent global financial markets implosion — a result of the US subprime mortgage crisis — and its subsequent adverse economic fallout. Now, managers are knee-deep in the wreckage, battling a host of challenges including liquidity issues due to the frozen credit markets, softening property fundamentals fuelled by global recession, investor redemption requests in some cases, and significant portfolio write-downs in most cases.
Those Were the Days
Students — there’s millions of them, they’re everywhere and the economic climate is such that their numbers are expected to swell further in the near future. Do you remember when you were a student? What do you remember most about that time? The lectures, the studying, the library? The parties, the socialising, the student union? The going home at the end of term? Managing meagre resources? Or the hunt for somewhere decent to live?
The financial turmoil of late 2008 and early 2009 has developed into a world recession, and demand has decreased significantly. The global demand for investment goods has slumped during the past six months, resulting in falling industrial production and significant layoffs, especially in the Swedish and Finnish export sectors. Swedish exports are expected to bottom out in mid-2009, due to the levelling out of the current global inventory adjustments together with increasing demand from US and Chinese consumers and a weak Swedish krona.
A New Opportunity
The global real estate correction currently underway may go down in history as one of the greatest asset bubbles the world has ever seen. Although global markets have experienced numerous asset bubbles in the past, from the Dutch tulip crash of 1637 through the dot.com bubble of 2001, it could be argued that no single speculative asset bubble of the past has been as far reaching and financially traumatic as the current crisis.