Realcast: Vonovia cheer, Europe slump, URW ups ante, Wola to the fore, Carroll dour

In the headlines this week:

There was sobering news for the real estate market in Europe when MSCI Real Assets released its capital trends report for Q1 which showed that European commercial real estate investment slumped to an 11-year low in the first three months of 2023 due to uncertainty of valuations and higher financing costs. Investment volume fell 62% across Europe to €36.5 billion. Most sectors were affected particularly offices but even logistics.

While the UK remains Europe’s largest commercial real estate market, it experienced a 59%. France overtook Germany to second place due to several large Paris deals in the first three months. Germany suffered badly with a 71% fall in volume, its weakest activity since 2010.

However, as mentioned last week following our Germany briefing, experts have agreed that investment activity had ground to a halt there is optimism that this situation will be reversed with better economic news.

There were increased signs of life in the German market when Vonovia, the largest real estate company in the country, announced the sale of a 30% stake in its residential portfolio to Apollo Global Management for €1 billion – it has bought 21 000 apartments and homes in Baden-Württemberg, Southwestern Germany.

In ESG-related news, three UK heavyweights, Persimmon, Aviva and Goldman Sachs have provided a total of £70 million financing to ultra low carbon modular housing manufacturer Top Hat, to fund a new factory in UK town Corby. It will be Europe’s largest modular housing factory. And logistics giant Panattoni has stated that it is turning more to brownfield sites for development and these now account for about a third of its developments. In Germany, though, the figure is 70%. The company stated that although they cost more to develop, investors prefer them because of their environmental credentials but also because their locations tend to be near to towns, closer to transport hubs and good for last-mile users.

Bayes Business School in London had good news for the UK when its research on lending to commercial real estate in 2022 revealed that despite the rise in interest rates and the decline in market transactions, lending was £48.6 billion in 2022, the third highest level since Brexit. Alternative lenders are becoming a more important source of credit. Finance for transitioning assets to low carbon is also in demand.

The past week saw the World Retail Congress in Barcelona, Completely Retail Marketplace in London and in the coming week there will be the Property Week Resi Awards.

Despite some negative mood music in Europe there have been comments that the UK is set to lead a recovery in deal activity and competition for deals is heating up amid sharper value declines with prices potentially having bottomed out for some sectors.

Elsewhere, Unibail Rodamco Westfield has taken back control of the Redevelopment of a long-running project in Croydon, London. The company bought back Hammerson’s 50% share in the Croydon partnership for an undisclosed sum. The project includes the Whitgift and Centrale shopping centres along with the High Street retail frontage, office blocks, multi-storey car Parks the Greater London Authority opportunity area for south London

In London, Shard developer the Sellar Group and Network Rail are to submit proposals for the £1.5 billion redevelopment of London’s Liverpool Street Station

Nike is to open its first digitally focused Nike Rise store in Manchester’s Arndale Shopping Centre.

In Poland, Warsaw’s Wola office district Budapest-headquartered Adventum Group has acquired the Wola Retro office complex, constructed in 2019 by Develia. Lincoln Property Company has commenced the construction of the 30,800 sq m office development known as The Form which is billed to set new benchmarks for sustainability and wellbeing in Poland. It will provide office, service, and retail space on nine levels. Meanwhile, 34,930 sq m Wola Center, acquired in 2020, has received a BREEAM In-Use excellent certification.

The social aspects of ESG were to the fore when Legal & General’s Suburban Build-to-Rent business signed a £150m five-year revolving credit facility to finance its pipeline of 1,000 suburban build-to-rent homes.

In the US Patrick Carroll, CEO of real estate investing firm Caroll commented that office and hotels would be “destroyed” and that the current downturn is “going to be ugly – at least as bad as 08 and 09.”

Meanwhile, Vornado Realty Trust, one of the largest publicly traded REITs in the US and one of New York’s biggest office landlords, announced that it is not going to pay its share dividend for the rest of 2023.