Editor’s Choice: It’s a good time to be a seller

When brokers avoid the question of whether it’s a better time to be a buyer or a seller, you know that the good times have returned.

Indeed, investment volumes across Europe were up significantly in 2014 and with just one exception, all the players surveyed for our annual brokers ranking increased their share of investment transaction activity. They are also upbeat about prospects for their European businesses for the current year. ‘The pie is growing everywhere and we aim to take market share in line with that growth,’ commented Mark Ridley, CEO of Savills EMEA, in an interview with PropertyEU for our upcoming Top Brokers report.

The final PropertyEU Top Brokers ranking will appear next week in the March edition just before we head off to Mipim for our bi-annual binge on meetings with the leading brokers in Europe and the companies they advise on the buy and sell side of investment transactions. We can already anticipate what they will be saying. ‘No, this is not 2007. The market today feels very different. The fundamentals are also different…’ And of course, this mantra which has become a favourite for countering the idea that a bubble may be forming in some corners: ‘There is a massive wall of capital heading for European real estate that is not about to abate any time soon. That will keep a bottom in the market.’

No doubt, we will also get our annual fill of brokers’ claims to ranking in the top 3 worldwide. Our own overview in terms of investment advisory indicates a clear league for the top 3 in Europe. Since we launched the annual ranking in 2007, almost without exception the trio has included CBRE, JLL and Cushman & Wakefield. All three are again in the running this year. But the gap between number three and the rest of the pack is narrowing. Conversely, the gap between the top 2 and the others is widening.

Ten or 15 years back, the pack was much closer
As one industry leader told PropertyEU recently, ‘Ten or 15 years back, the pack was much much closer. Now there are two companies who have emerged as leaders followed by a pretty big gap and then a few other companies and a bunch of small ones. The companies in the middle will have to take a decision on whether they compete for a position at the top or whether they go in another direction.’

In Europe, the group of contenders for third position appears to have grown in the past 12 to 24 months – at least in terms of investment advisory. Colliers International, DTZ and Savills are all in the running while the odds for Paris-based BNP Paribas Real Estate are also looking good thanks to its dominance in two key continental markets – its home market France and Germany. Even Stockholm-based Catella is no longer an outsider according to our ranking, thanks to its partnership with Strutt & Parker in the UK.

Interestingly, all of these players are seeking to move the goalposts. Colliers International has already made a serious move. Like Cushman & Wakefield, Colliers is eyeing a position in the top three worldwide and on this side of the globe has seriously tried to expand its presence in the UK, the jewel in the European crown. Now it is taking concrete steps to obtain more financial room for manoeuvre.

Earlier this year, the company’s Toronto-based parent, FirstService Corporation, unveiled plans to spin off Colliers International as an independent, publicly traded unit to enable the firm to ‘take advantage of internal growth opportunities and industry consolidation in an industry where brand and global capabilities are key competitive advantages’.

DTZ is back on the dancing floor
Meanwhile former wallflower DTZ has reappeared on the dancing floor with a new stride in its step. Just a few years ago, the company fled in an unlikely direction into the arms of Australian engineering conglomerate UGL after it was rejected by a French duo comprising the company’s then owner SGP and BNP Paribas Real Estate.

But its fortunes have changed since its takeover by a private equity investment consortium backed by Texas-based TPG Capital, PAG Asia Capital and Ontario Teachers’ Pension Plan. Earlier this year the firm announced that it is now operating with Cassidy Turley as a single global firm following the completion of the acquisition of the US broker by the consortium. As such, DTZ is another contender for the hotly contested membership of the global top 3.

Another stalwart that has survived the recession and is now seeking to join up the dots is Savills. The company is renewing its focus on its pan-European activities, the company’s head of EMEA Mark Ridley told PropertyEU. Savills was already in expansive mode before the crisis broke out but the subsequent downturn threw a spanner in the works.

However, the company has not stood still in the meantime, Ridley said. ‘In the past few years, we have worked on upgrading skill sets and moving the right people in the right positions. And we have realised substantial growth in the countries where we already operate, in particular the Netherlands, Belgium, Germany and Ireland. We have a fantastic team in Spain and a new country head in France.’ Even in the recession, Savills took on more recruits, Ridley added. ‘We have focussed on organic growth. We wanted to come out of the recession fitter than before with a comprehensive package of services.’

Like its larger competitors CBRE and JLL, Savills is a wholly owned company and the increase in global deal volumes has helped to bolster the share price of such advisory firms. CBRE shares were trading at $34.65 on Thursday, close to their 52-week peak of $35.37. JLL was trading at $162.98, down just slightly from its 52-week peak of $164.48, while Savills was trading at £728, just below its 52-week peak of £742. Savills’ Ridley is not ruling out acquisitions. ‘Financially, it’s a much better picture and we have been generating positive results. We can now look at developing the business.’

Singles and couples
Further consolidation both in Europe and globally is clearly on the cards: the question is where the next big move will come from. As one source told PropertyEU, there’s always a lot of speculation in this industry about who will marry who. ‘There are lots of singles trying to make a couple.’

One single that appears to be determined not to wed with a rival is Cushman & Wakefield. Earlier this week, the firm announced that its owner, the Italian Agnelli family, has appointed Goldman Sachs and Morgan Stanley to find a buyer. The firm is currently the largest privately owned commercial real estate agency in the world and is keen to keep the business private and avoid a merger with one of its listed peers or a sale to a rival agency.

‘If a rival doesn’t buy it, I think a US private equity buyer will snap it up,’ Joe Valente, head of research and strategy for the European real estate group at JP Morgan, told PropertyEU. ‘It’s a strong possibility, given Cushman’s strong presence in the US.’ Valente estimates that the sale could take around six months to complete. ‘It’s a good business, particularly in the US but the big "hole" is Asia. I think whoever buys C&W is likely to tack on an Asian component.’

However, huge interest in global real estate markets makes it hard to predict just how much C&W could fetch. ‘Nothing would surprise me on the price,’ said Valente. ‘If Exor paid around $500 mln for its initial stake and manages to sell it for $2 bn, that represents a massive nest egg.’

If tha√t is the writing on the wall, there is only one conclusion: we are back in a sellers' market.

Judi Seebus
Editor in chief