CBRE is seeking to beef up its activities in the hotel sector, the company's CEO EMEA Martin Samworth told PropertyEU.

CBRE is seeking to beef up its activities in the hotel sector, the company's CEO EMEA Martin Samworth told PropertyEU.

The company is seeking to expand its presence in valuation, consultancy and investment in Europe as well as Asia-Pacific and the US, Samworth said. ‘We have made a number of hires in the past year to create a globally connected business line and access international capital. The hotel business is a specialist market in terms of how the properties are valued and run, with differences in leasing structures.’

CBRE turned in a stellar performance last year and just missed out on the leading position in our annual Top Brokers ranking which again went to rival JLL.

‘Last year we saw a notable increase in investment activity across the region,' Samworth noted. 'London continues to be a key target of core investment strategies and will continue to perform well in the coming year. The fundamentals are very strong, both for offices and retail, and there is good reason to believe that domestic and international investment will continue through 2015.

CBRE also saw a significant increase in investment in France, Spain, Ireland and Poland in 2014, he added. 'Those trends will continue in 2015 although at slightly different rates.'

Fundamentals are sound
European real estate is still in favour, he said. ‘In terms of sentiment, our talks with clients and research all show a very strong appetite for commercial real estate in Europe. The fundamentals for real estate as an asset class are sound and running yields remain attractive relative to other asset classes. This is a good time for real estate. We’re seeing an improving debt environment, low interest rates and a sustained flow of international capital.’

Samworth rejects the notion that the real estate market is moving in the same direction as in the boom years of 2006-2007. ‘It’s not 2007,’ he maintained. ‘The market feels very different. If you look at the capital stack, we’re seeing a much higher proportion of equity going into acquisitions and more balanced investment strategies generally.'

The fundamentals are also different, he added. 'In the coming year, there’s a strong likelihood that there will be an increase in occupier activity and we’re seeing little oversupply in many CBD locations. We’re at a different point in the cycle. In 2007, I was already beginning to feel uncomfortable before the downturn hit. If I look back, I think I was already starting to feel uncomfortable from June or September 2006. Nobody knew then what would tip it over the edge, but it was already clear that the debt-equity ratios weren’t sustainable. We’re now in a much more balanced environment. We’re seeing much better risk management and we’re seeing some economic recovery, even if it is patchy in the regions. Poland, for example, didn’t even have a recession and sentiment in Spain has now changed fundamentally.’

Some fundamentals are still concerning, Samworth conceded, pointing to the high level of unemployment in Spain. ‘France is later coming out of the cycle, but we will see positive momentum in the coming year. The economy is gradually improving and investors are not running ahead of themselves. We’re seeing a measured and sustainable rate of growth, which is a key difference (to 2007).’

Prospects are bright for logistics
Looking ahead, Samworth is particularly upbeat about logistics. ‘We expect to see a strong year again this year. But I’m hoping we will see a broadly based increase in activity in a range of sectors. I do think and hope we will also see an increase in development activity, not just in the UK but also in mainland Europe.’

CBRE´s Capital Advisors group also continues to perform well, he added. ‘In Richard Dakin we recently made a key hire from Lloyds and we see more and more opportunities for loan origination, debt servicing and loan sales.’

Opportunities are growing for advisory services on equity raising and the creation of new funds and vehicles, Samworth said. ‘Equity raising within Capital Advisors had a phenomenal year in 2014. We’re also seeing increasing diversity in terms of investors, not just from London but also Asia.’

The ability to tap into existing relationships and local representation is incredibly important in this context, he added. ‘The way business is done is global, that’s what we’re seeing more and more. Investors want the best services and insight, and existing relationships are becoming increasingly important.’

Investors are not only buying real estate in a different way, they’re seeing it being packaged in a different way too, Samworth said. ‘As an advisor, you can’t afford to sit still. Investors are becoming more sophisticated, they are looking at real estate from multiple angles and that requires involvement from different departments to holistically provide better services and bring a deal together. More and more, we’re seeing the need to understand the financial structure of an individual asset, how to optimise the capital structures and the sale of the property. We need to offer a range of specialists, not just somebody that has a particular competence.’

The same applies to developments, he added. ‘We can draw on a range of specialists and a blend of services to give advice on how to fund it and create an optimal scheme. Connections are important, between investors, advisers and occupiers. Having access to these different insights are very helpful.’

Platforms are becoming more sophisticated
‘We’re seeing more sophisticated platforms and investors are demanding sophisticated responses.’ In that context, technology is becoming more and more important, he agreed. ‘The question of whether we are well-organised and have the right software takes up quite a chunk of my time.’

‘Robust’ systems are expensive to acquire and run, he added. ‘I fundamentally agree with the idea that technology is becoming increasingly important, but it is important to remember that these things are largely enablers. At the end of the day, it’s a people business. We provide advice, not a software system. We are advisors, which means we have to have the right people. Interaction between the individual and client is key.’

Read more about CBRE's activities last year and those of its peers in PropertyEU's Top Brokers ranking published in the March edition of our magazine