European real estate markets have become sufficiently ripe for opportunity fund managers to pounce, Apollo Real Estate’s head said at the ULI Europe conference in Paris this week.
European real estate markets have become sufficiently ripe for opportunity fund managers to pounce, Apollo Real Estate’s head said at the ULI Europe conference in Paris this week.
European real estate markets have become sufficiently ripe for opportunity fund managers to pounce, Apollo Real Estate’s head said at the ULI Europe conference in Paris this week.
Speaking during a press conference, Roger Orf said vendors had started to capitulate and that it was now possible to find opportunities on a selective basis.
‘It’s midnight in Europe, it’s no longer 5 to 12 or 5 after 12. The markets have bottomed out in the opportunity fund environment,’ he said.
Orf noted that activity in the opportunity fund segment had picked up again ‘for the first time in five or six years’. We’re not seeing a flow basis like in the mid-1990s and I’m not bullish about the market. But I feel more optimistic than in the last couple of years.’
He said Apollo would continue to pursue residential properties in the UK and Germany where supply-demand dynamics are particularly favourable as well as capital restructuring opportunities. 'We're also pretty aggressive on Spain,' he said, but added that the bid-ask spread was still significant and that Italy was currently a preferred option.
Transaction volumes in Spain remain low with retail sales and rents continuing to decline, but the bottom is in sight, Pierre Vaquier, chief executive of AXA Real Estate, told the assembled journalists. For the foreseeable future, however, cap rates in Spain will continue to come down, according to Alex Otto, CEO of German developer ECE. ‘That needs to be factored in.’ At the same time, the number of forced sellers will increase as financing conditions tighten further, he added.
For the coming year, Otto expects ‘more of the same’ with rents softening in a low-growth recessionary environment. Gerard Groener, CEO of Corio was equally sombre about prospects for the retail sector and foresees a growing divergence between prime and secondary locations across Europe. ‘Retail will remain under pressure as consumer spending is not likely to step up. Retailers are regrouping at the best places and there’s a widening gap between cash flow at certain assets types.’
