JLL Says Europe Down but Still Strong

Tony Horrell, JLL's head of European Capital Markets division, tells GlobeSt.com following the conference that he expects unstable market conditions to remain during 2008, and that investment transaction volumes across Europe will be down 25% from 2007. "We've been rocked, we could be in better shape," he admits. "But it's just a different ballgame now, of what to buy and where to buy. It's pretty obvious that Europe is slightly polarized, some markets have accepted that pricing has changed, and others are partly in denial. The UK has accepted it and re-priced itself, but in general the continent has not."

He says in the next 18 months, the markets will re-price, and investors will just have to resign themselves to getting their hands dirty in hard research about what to buy. The good news, he says, is that he expects volumes to fall just to 2005 levels. "In 2005, we all thought such levels of activity were reasons for great optimism," he says. "It's just that at the beginning of 2005, there was a five-to-one ratio of capital to assets, where now its around a two-to-one ratio."

During the conference, various officials reported on the different major city markets. Julian Stocks, head of capital markets in England, said that the UK has become a value market. "We think that there will be an overcorrection in the London office sector, which will result in a very good buying opportunity for a short period of time," Stocks said.

Christian Ulbrich, CEO of JLL Germany, said the country will have the strongest rental growth, and that "the balance sheet lending of German banks differentiate the market from elsewhere in Europe." He also said large-scale mixed portfolios will become scarce, and retail will start to challenge office as the most popular asset class.

The Russia market is still the most dynamic, said Mark Jagger, managing director of JLL in the country. He said retail will be especially featured this year. "Russia's retail market is driven by very different consumer spending patters to this in the West and is still very undersupplied in terms of retail space per capita. Consequently, the number of shopping center openings in the next two to three years is set to double year on year," he said during the conference.