ULI Paris: Thought leaders see ‘more volatile’ environment in next 12 months

The political, economic and social environment in Europe has become much more volatile, ULI thought leaders agreed during a final panel discussion at the ULI Europe annual conference in Paris on Wednesday.

‘We will talk about politics for the next 12 months,’ Alexander Otto, CEO of ECE Projektmanagement, told the conference. Pointing to the rise of IS, the conflict in Ukraine, the Greek elections and the issue of the euro, he said: ‘We are living in a much more volatile world and it will remain volatile for the next couple of years.’

‘The geopolitical context is worrying,’ agreed Christian Ulbrich, CEO of JLL EMEA. Asked which piece of news he would be watching out for this year, Ulbrich noted that the world has always had trouble predicting where the next war is coming from. ‘I’ve just come back from the World Economic Forum in Davos and none of the issues that flared up in 2014 were predicted at last year’s meeting. The same will be true for next year.’

REAL ESTATE IS A CITY BUSINESS
In that context, the best course of action is to stay in mature markets, Ulbrich argued. And Europe is a great place to invest, he added. ‘For sustainable investment you need a robust legal system, good infrastructure and flourishing major cities. Real estate is predominantly a city business, not a country business. Countries may not be in good shape while some of their bigger cities are. There’s no need to go into more emerging markets in the world.’

Investors may be positively surprised at how Europe does in the next 12 months, he continued. ‘We now have low interest rates and oil prices, and currency rates are very attractive. Exporters like northern Italy are having the time of their lives; the same applies to Germany. The whole environment is ready for positive surprises. Just imagine if we get some better politics in play, for example in Spain. Spain took some tough decisions and is really coming out of the trough, there are some very positive developments.’

Europe is indeed a safe haven, agreed ECE’s Otto. The key message from the panel on views from three continents earlier in the day sent out a key message, he said, that Russia and China are not the best bets at the moment. ‘You have to evaluate the political situation and that feels more comfortable in northern Europe, Germany and the US. Russia is interesting, but the argument for the US is the most convincing and has reinforced my views on the country. The US has good DTU – demographics, technology and urbanisation.’

DISRUPTIVE FORCES
Disruptive forces like storms and floods are also having a major impact on the real estate industry, ULI Europe’s new CEO Lisette van Doorn noted. Referring to a presentation earlier in the day by Henk Ovink, Principal ‘Rebuild by Design’ and senior advisor to secretary Shaun Donavan from the Hurricane Sandy Rebuilding Task Force, Van Doorn said she was struck by the huge impact that water and disasters can have on our lives. ‘Extreme weather is an issue that more people need to be more concerned about and ULI needs to do more with it too. We have already started with our extreme weather report, now we need to do more with it at the level of the national councils.’

With negative or near-negative interest rates, the economic environment for real estate investment and development could hardly be better, ECE’S Otto said. ‘Bankers are giving us money to do a deal!’ he joked. But there are risks, Van Doorn added. ‘There’s so much money coming into the market, our ULI Emerging Trends report shows that there’s even interest in going into Athens. But the economic environment is still very fragile. There’s a huge amount of capital flows coming in, and some investors are recognising there is some risk but they are not acting upon it. I think we’re at a crossroads as economic growth still has to come through. The issue to look at is do we see signs of a bubble? The picture would be different then.’