Cobalt news
Better than you think
Timothy Rowe
03/06/2008
There seem to be some murmurings of activity in the investment market at last. While there is much trepidation and caution, there does seem to be a pipeline of deals being generated across the market. Some of this is still below the radar, deals that are being done quietly by institutions in order to sure up their cash positions for their nervous retail investors, but many more are starting to be well documented and creating some buzz. With the reality of tenant demand holding up in prime real estate and the wall of international money waiting to pounce, there is a positive feeling now that sellers are starting to reconcile the fact the yields have shifted and prices have come off their height of early 2007. The net result of this is the deals can now start to be done.
The weight of money out there to invest in core real estate has been hard earned over the last decade and is eager to find a home. In the recruitment sector we are starting to see an uptake in the number of requirements for transaction professionals to source and process these deals. Though it has to be said that these are not at the same level as in the booming years of 2002 – 2007, there is little expectation of a severe downturn for quality investment grade assets, but merely the correction and lowered return expectations that we have been seeing. The major change is clearly the fact that cash rather than debt is the driver in the sector and this significant change has resulted in the changing face of the market’s participants. At Cobalt we are seeing this in the types of clients that we are recruiting for with institutional investors and sovereign wealth becoming obvious employers with these current market dynamics.
The market should be cautiously encouraged by the signs of activity in the market as the biggest frustration in the market is inactivity. Whilst the re-invigoration in the transaction market is good news for the investment and agency community, the real day to day activities of property ownership are continuing undiminished. We are still seeing demand for management, asset management, construction and valuation professionals as the ‘real economy’ remains active and core assets retain and attract tenants. This divergence of opinion on the real economy between informed data sources from businesses at coal face and the opinions expressed in the popular press are very interesting. The press’s dour reports on the state of the market are in contrast from many in the real economy; yet do go some way to destroying confidence in the property community at large. I suppose that encouraging early signs of confidence in an environment that has been spoilt by record gains over the last few years are not headline grabbing. However they do more accurately reflect that perhaps, just perhaps, things aren’t quite as bad as some have been predicting.
The feeling out there is that those who do not want to risk missing the upturn in values are cautiously putting their toes in the water and transacting a small number of deals, while the heard won’t start to find confidence and begin to talk about investing until the late summer. We shall see, but it is clear that there are some encouraging signs despite what some would like us to think!