More than €50bn (£46bn) of equity is available to invest in European commercial property in 2009, according to Jones Lang LaSalle’s latest European capital markets research.
While some estimates of ‘war chests of equity’ waiting to buy have been overblown, the report, ‘Time for Decisions’, said that buyers including institutions, opportunity funds, international parties and some German funds would be looking for opportunities.
Tony Horrell, head of European capital markets at Jones Lang LaSalle, said: ‘We have no doubt that operating conditions in 2009 will be the most challenging that many in the market have ever encountered, but for those able to look to the medium term and with access to capital we think 2009 will be the year when the market begins to clear and some opportunities will be too good to miss.
‘For the smart investor this year will be about positioning themselves to take advantage of these buy-side opportunities as they emerge.’
The report said debt finance would remain limited, with low loan-to value ratios and high margins. It also estimated that values had further to fall following the 40% plunge in some markets from the peak in summer 2007.
Horrell said: ‘We fully expect it will take three to five years for banks to repair their balance sheets and they will only begin to address this problem in 2009. They will most likely be ultra-cautious and conservative in their handling of their outstanding real estate exposure and highly selective in their lending criteria.’
Nigel Roberts, chairman of European research at Jones Lang Lasalle said: ‘Some markets like London, Paris and Madrid are well advanced in their market corrections and will no doubt attract increased investor interest if the fundamentals are judged to support the new price levels.
‘Fair value estimates, likely yield ceiling indicators and asset specific pricing will become crucial decision tools in 2009 for investors timing their market entry, and judging price and value trade-offs. We also expect market conditions will contribute to the trading of increasing numbers of assets that are seldom brought to the market and these will most likely reflect premium prices or change hands irrespective of whether the market has hit a recognised price floor.’