JLL's newly-appointed EMEA CEO sees 'very challenging' year ahead

Christian Ulbrich is about to step into some very global shoes. Jones Lang LaSalle's (JLL) head of German business will become the new CEO for the EMEA region in January next year, succeeding Alistair Hughes, who will take over from Peter Barge as CEO for Asia Pacific. In his new role, Ulbrich will also join the firm's Global Executive Committee.

Ulbrich, 42, joined the firm in early-2005 as head of its German business, where he has driven strong growth, tripling Germany's revenues in the process. Since 2007, JLL has added four new German offices, giving the firm a presence in ten cities across the country. Ulbrich trained as a banker before completing an MA in business administration at the University of Hamburg in 1994.

He talks to PropertyEU about where to find value in Germany and the difficulty of obtaining finance for more opportunistic investments.

PropertyEU: How long do you think the credit crunch is going to last and to what extent do you expect it to continue to affect global property markets?

Ulbrich: This is a difficult one. I was wrong about that earlier - I didn’t expect it would have such a strong and long-lasting impact at the beginning of the crunch. I think we will have a very challenging year in 2009 and I don't expect any real improvement over the next nine to 12 months.

PropertyEU: What will your priorities be in January concerning the EMEA region, given that the credit crunch clearly won't be over by then?

Ulbrich: It's too early to say as I won't take over in my new role until January (2009). But it's clear that we are now in a different market to the one we have inhabited in the two years before the credit crunch. Therefore it's not just about setting the tone for growth but about setting the tone for quality and client management.

PropertyEU: Is JLL seeing a wave of distressed property preparing to hit the market - if so, in what countries/sectors?

Ulbrich: We're not seeing a wave but I think we will have some distressed portfolios coming to market - encompassing all property asset types. However, I think there will be less distressed portfolios than some people hope. I think we’ll see some such portfolios coming to market in Germany from investors who bought into that market rather late in the cycle and who have financed such portfolios very aggressively. Some asset classes, such as retail warehouses and residential, have also been financed very aggressively, which could make them vulnerable. Since many of these properties were acquired, yields have gone up, so these portfolios might be under threat pretty soon - if the banks pull the trigger.

PropertyEU: Where do you currently see the best investment opportunities and why?

Ulbrich: It always depends on the level of risk you are prepared to take. For opportunistic investors, I think there are some very interesting opportunities in core European markets, including Germany and the UK. At the moment, if you are prepared to take some leasing risk, you can find some marvellous opportunities in Germany, even in cities like Munich. However, the difficult thing is to find acceptable financing, where you don't have to inject too much equity. The banks are rather reluctant at the moment to finance properties that are not 100% core. In the medium term, I am very positive about Turkey. It is developing fast and will eventually be part of the European Union, making it more attractive to investors.

PropertyEU: Do you think yields will continue to move outwards in many European markets or do you expect them to stabilise soon?

Ulbrich: In the near-term, I think we will continue to see yields moving outwards, although this will happen to a different degree in different European markets. In some countries - most notably the UK - we have seen yields move out more sharply than in others. As such, markets like the UK will probably also be the first to stabilise. I think that yields in the UK will probably stabilise before they do in Germany, where the yield movement has been slower. London is now starting to look attractive to Germany's open-ended funds because prices have fallen and that will also help to stabilise the market.

PropertyEU: How do you expect Germany to perform going forward?

Ulbrich: It has got quieter. There have only been around eleven deals this year that were valued at more than EUR 100 mln each, whereas in the past two-to- three years deals of around this size were considered to be quite small. I think that the UK might actually perform better than Germany next year because prices have fallen more sharply, which is attracting investor interest. That said, German high street retail is doing very well on the leasing side. The logistics sector is also doing very well, even better than last year. Demand for modern logistics space in Germany is very strong at the moment because high transport and labour costs are making production in CEE less attractive. Therefore, a lot of demand for logistics space in Germany is coming from domestic firms.

PropertyEU: Which geographic markets/ asset classes do you think are best avoided at the moment and why?

Ulbrich: I’m always surprised by how much money is flowing into some emerging markets, where liquidity is limited. Any advantage that such markets may have from a yield perspective tends to be outweighed by the liquidity in big, core markets. The real question is: are emerging markets - including Russia - liquid enough so that you can get your money out quickly if you want to? Following recent turmoil in the Caucasus region, I think investors will be more wary of where they invest.

PropertyEU: Is JLL becoming more interested in the retail sector in Europe, following your recent acquisitions of retail agencies?

Ulbrich: We were good at retail previously but the market did not really seem to notice! It was therefore important for us to enhance our profile in the retail sector with our recent acquisitions of Churston Heard in the UK, Alkas Consulting in Turkey and Kempers in Germany. People are making more short city trips, which is also boosting the retail sector across Europe. Tourists are driving the retail sector in cities like Munich, where there are a lot of Middle Eastern visitors.