CBRE pushes the pedal down further with new European CEO

CBRE's appointment of Martin Samworth as CEO of Europe, the Middle East and Africa (EMEA) comes at a time when the property adviser is 'pushing on' in all areas in Europe, Samworth said during an interview at the Mipim fair in Cannes.

'We are pushing the pedal down further in areas where we see growth opportunities. We see significant opportunity for example on the asset management side and are looking at a number of opportunities in that area.'

CBRE' name has been linked to a possible takeover of Corpus Sireo, Germany's largest asset management company which announced it was up for sale earlier this year. The German company, whose service business in 2013 posted an EBITDA of €24.6 mln, has its headquarters in Cologne and employs 525 people in 11 German offices and one office in Luxembourg. The company's assets under management total €13.7 bn, of which €10.4 bn, or 76%, are commercial real estate properties.

Samworth conceded that Germany is also on the company's radar, but declined to comment on the takeover rumour.

ACQUISITIONS
Property management is another area where CBRE is keen to grow, Samworth said. 'We acquired three companies last year.' Expansion of the leasing and valuation teams is also on the cards, he added. 'In general on the occupiers side, there are loads of opportunities out there and the volume of business in increasing, not decreasing. Our facility management capability is key in that context and we will continue to invest in that.'

The company has also beefed up its residential business in the last 12 months and has acquired two firms focused on this area including Alan Selby & Partners which advises on residential development, sales and lettings focused on the London Docklands market, including Canary Wharf and the City of London. Samworth: 'We’re still focused on London at the moment, but we also see other opportunities in the Middle East and Dubai.'

The real estate finance side of the business has 'grown enormously' in the past few years and Samworth is keen to build on that further as well. CBRE has been active in that area in Europe for almost a decade, he pointed out. 'It's not typical of this type of business, but having a deep understanding of the capital stack provides a huge amount of value. Debt is an asset class of its own and is becoming increasingly sophisticated. We have facilitated a closer working relationship between the real estate finance and capital markets teams - having the ability to access 50-60% leverage and restructure debt is invaluable.'

INTERNATIONAL INVESTORS
Europe currently tops the wish list of global real estate investors and investment volumes in the region jumped by as much as 30% to almost €170 bn last year, according to CBRE figures. Commenting on the investment climate, Samworth said he doesn't think that the pace of change will continue 'at quite the same level'. 'There is clearly a lot of equity around globally, but there is a caveat if you're looking at the investment market from a purely domestic perspective. If you're looking at it from an international perspective, then the UK and other parts of Europe look like quite good value. The market is going through a shift at the moment due to changes in the industry and increasing capital flows. Everything is becoming more global and capital is looking for better returns. On a relative basis, that is still possible even if the market has moved a lot recently.'

Samworth pointed out that the international component of real estate investment targeting the UK is as much as 80%. 'The variety of capital is as varied as we've ever seen, we're seeing an influx of Japanese investors, from the US, the Middle East, Asia, while Australian money is also yet to come. Capital is coming from all parts of the globe which is slightly different to previous cycles. The Australians have come before, but they will now look further afield.'

The market fundamentals remain very strong, Samworth noted. 'That's why there's a level of confidence. There's still some yield compression to come in a number of markets, even in London, but there will be rental growth. We haven't got an oversupply of stock, with the possible exception of secondary and tertiary markets. London is not oversupplied in terms of housing and prime retail continues to do well thanks to rising GDP. The regions are also becoming increasingly attractive,’ he said, pointing in particular to the bigger UK cities such as Birmingham, Leeds and Manchester. 'There's mileage in the regions.'

Of the distressed markets in Europe, Ireland has been the hottest in this cycle, but Spain could move in the same direction, Samworth said. 'There’s still a lot to come through. Sareb (Spain's bad bank ed.) still has lots to do. A lot is residential and Madrid is the number two destination for investment. It's quite interesting to see how sentiment has changed.' While Spain is a definite candidate for investment in the next 12 months, the political and economic situation in France could deter investors in that country, Samworth said. 'If the political and economic environment improve in the second half, more activity may happen then.'

ROARING RUSSIA
In the run-up to the Crimean crisis earlier this year, Russian real estate was roaring ahead again at full throttle. The developments in Ukraine are likely to deter international investors in Russia and it is likely to have some impact on domestic levels of investment, Samworth said. He added that he had 'mixed feelings' about the Russian-Ukraine crisis: 'Events could move along quite rapidly, but I have a nasty feeling that it could go on for a while. In a period of uncertainty, decisions are deferred, or the decision-making process becomes more protracted. That is more relevant to international corporates which could review their time scales.'

Looking forward at potential challenges in the year ahead, Samworth said a key factor was interest rates. 'What keeps bouncing back is the question of what happens if interest rates ticked up quite a bit? That would probably have a dampening effect on the market as debt would become more expensive. The question is by how much and how fast they will rise. That is really the main issue.'