Europe’s listed property sector recovers lost ground

Europe’s listed real estate sector has recovered a significant stretch of ground lost in recent years to its counterparts in the US and Asia, EPRA’s CEO Philip Charls told PropertyEU in an interview ahead of EPRA’s annual conference in Berlin in September.

In 2012, Europe’s share of the global market index had fallen to just 11% but is has now risen dramatically to 18%. ‘This is not quite back to its long-term average of 20%, but a significant turnaround nonetheless,’ Charls said.

The growth of Europe’s listed sector has also been fuelled in recent years by the introduction of REIT regimes, in particular in Ireland and Spain but also Austria and Sweden. ‘Ireland and Spain are two countries that have accelerated from the starting blocks in the past three years,’ Charls said. ‘EPRA has lobbied relentlessly for REITs at the national level in both these markets and also Italy, where the re-capitalisation of distressed markets was essential and these governments needed to step up their game.’

These three markets combined have raised over €4 bn in the last couple of years, he added.

Meanwhile the Dutch market has shrunk in recent years in terms of market capitalisation following the mergers of French office and retail giant Unibail with Rodamco and, more recently, its Paris-listed peer Klépierre with Corio. But Charls is hopeful that the Dutch listed real estate sector will bounce back at some point.

Residential consolidation
‘There’s a lot happening in residential. Private equity players are moving in, restructuring portfolios and at some point will be thinking about how to exit. That might be an interesting area.’ Charls foresees a fully-fledged private rental market further down the road. ‘We’re starting to see more development…the fact is that they can’t develop the product fast enough.’

Although the Dutch office market has since the crisis been viewed as the ‘graveyard of Europe’ due to high vacancy levels and obsolescence, things are changing, Charls said. ‘We’re starting to see transformation projects, maybe not mainstream but it’s a significant development at the edges. Companies like Syntrus Achmea for example are redeveloping old vacant office buildings in Amsterdam and The Hague and converting them to residential. These projects are in central locations and not all buildings are suitable. But two years from now I think we will see a change.’

More specialisation
Consolidation and scaling up in size are going hand in hand with greater specialisation, Charls agreed. ‘There is definitely a trend towards more specialisation and focus. Size is the issue, but we will get there.’

Healthcare is one sector where Charls sees enormous opportunities. ‘All over Europe, the private sector needs to take over public tasks. I think the healthcare sector in Europe could explode. There are opportunities for the listed healthcare sector to grow and become more like the US. There are even projections that at some point it will sit between offices and retail in terms of size.’