Passive investors still waiting for 'saviour'

Many property investors in Europe are wearing 'rose-coloured glasses' and have not adjusted to the changed market reality, according to Ric Lewis, CEO of AEW Curzon Partners.

Speaking to PropertyEU TV at MIPIM last week, Lewis said many people still hoped that strong property fundamentals would prove to be the saviour to the maelstrom in the capital market. But he cautioned that GDP growth is slowing down in Europe and this was slowing property fundamentals. 'If you look at the historic correlation in Europe when GDP growth approximates 2% or less, vacancies increase.'

'What people are calling the credit crunch is not over; it is still claiming lives and I think it will continue to claim lives in the foreseeable future. We are emerging from the first stage denial. The second stage is acceptance and we are somewhere in between,’ Lewis said. 'While non-one in the real estate sector can continue to deny that they were being affected by the credit crunch, many professionals had not reached the ‘come to the Jesus moment’ when they are ready to sit down and talk about what to do with their property holdings now that the market is strained.'

'So they still want to trade on yesterday’s prices, they want to trade their lesser quality assets, they want to sell away their problems,' he said. 'They are not really ready to get to the place where the market can experience that clearing mechanism than can get us back to that more fluid environment.'

Lewis warned that the property market was moving into a time when the capital markets and decreasing cap rates are no longer sufficient to make money. 'This is an exciting time. You have to have an opinion, have a strategy and know how to do something. I think that is going to separate the ladies from the girls, and the men from the boys.'