Buyers should 'rest' this year, ULI conference hears

Buyers of real estate in the UK and Continental Europe should take the rest of the year off as they won't miss much, the ULI European Trends conference in Stockholm has heard. Taking part in a panel session called 'Rethinking the Future - Seeing beyond the Clouds', Roger Orf, managing director of European real estate at Citigroup Property Investors, said he did not see much sign of life in the sector due to the impact of the credit crisis. He forecast that it was unlikely the market would revive before the middle of 2009.

Orf said that debt, the 'mother's milk' of the real estate sector, had been shut down, causing a sharp fall in transactions. He argued that the type of financial engineering that led to the creation of commercial mortgage-backed securities and other exotic debt instruments had been shown to add very little value to the real estate universe. Orf said investing in performing real estate debt would probably be a main business activity for the next few years.

Erik Sonden, managing director of European real estate at Societe Generale Real Estate Finance, also struck a sombre note. He told the 130-plus delegates attending the ULI event that European real estate transaction levels were very low and this was unlikely to change for at least 12 months. Noting that many property funds are coming up to their expiry dates and will have to sell assets, he advised: 'look out for distressed property sales'. Such sales, he said, will be a vital mechanism to establish pricing levels in the post-credit crunch environment.

Olivier Piani, president of GE Real Estate Europe, stressed that real estate transactions are still taking place. He agreed, however, that investing in performing debt had been one of GE Real Estate's largest operations in recent months.