JLL: Corporate real estate asset disposals reached new high watermark in 2018

Disposals of corporate real estate assets in Europe raised a new high watermark of €17.4bn in 2018, according to new data by JLL, in more than 420 transactions and the fourth consecutive year in which the total value of corporate disposals exceeded €16bn.

JLL pointed to seven major drivers of activity in 2018:

  • Lease accounting changes implemented in the 2019 financial year, which have driven the timing of deals both pre and post the changes.
  • High levels of investment into the wider real estate market and rising asset values – which has made property disposals more attractive to corporates across all major markets and sectors.
  • Low interest rates and the low cost of capital environment for corporates with investment grade credit ratings – adding a cost-effective route to raise capital and fund new facilities.
  • A greater range of leaseback structures supported by a wider range of counter-parties, such as income strips and credit tenant leases – providing alternatives to ‘traditional’ sale and leasebacks.
  • The evolution of workplace trends towards greater flexibility, which supports leasing in preference to ownership for generic properties. Pressure from analysts and shareholders to unlock capital to invest in core business is adding further impetus.
  • The emergence of specialist landlords – enabling more complex assets to be considered for sale, such as research and manufacturing facilities.
  • Forex benefits for corporates accounting in sterling from selling in euros or US dollars denominated assets.

The UK, Germany and France were Europe’s most active markets for corporate disposals in 2018, according to JLL, accounting for almost half of all corporate disposals last year.

The UK saw close to €3.5bn invested across 66 corporate disposals in 2018 – compared with €2.8bn across 87 disposals in Germany. Offices were the UK’s most active sector, with more than €2.3 bn invested across 21 disposals.

In keeping with previous years, industrial assets represented a higher share of disposals in Germany than in other major European markets. Slightly more than half of German corporate disposals in 2018 were of industrial assets, raising more than €1.1bn.

France saw almost €2.7bn worth of corporate disposals last year, driven by a steep rise in the value of office disposals. By the end of 2018, corporates had disposed of more than €1.8bn worth of French offices across 25 transactions.

Elsewhere, the number of corporate disposals in Spain has also risen over the last couple of years. In 2018, 31 disposals attracted almost €1.4bn of investment. In the Netherlands, more than €1bn was raised across 33 transactions. The Nordic countries saw 57 disposals in 2018, collectively raising more than €1.7bn.

JLL’s data was in a new report, Raising capital from corporate real estate, which examines the also provides a more detailed sector breakdown.

james.wallace@realassetmedia.com