RICS reviews the strengths and weaknesses of Europe’s key cities as they grapple with the euro crisis
Corporate Real Estate: investment and EU Cities*
Efficient, flexible working environments, public transport networks and ‘green’ buildings are amongst the key drivers of investment attraction in Europe’s key cities, says the RICS report “Corporate Real Estate: investment and EU Cities”, launched today at Expo Real, Munich (Tuesday 9 October 2012).
According to the findings of the RICS paper, banks have virtually ceased lending for real estate investment outside core markets such as London and Paris, often providing finance only to major international firms. As a result, investors and occupiers are reluctant to take decisive action and commit to a deal as they wait to see how the eurozone crisis develops. However, the crisis has also brought some positive trends to the market, as reduced lending means less speculation, a return to fundamentals.
The report suggests that occupiers are focusing on consolidation, cost-cutting, boosting productivity and encouraging flexibility, with demand continuing for space-saving efficient working environments and ‘green’ buildings, often in lower supply in Eastern and Southern European markets.
Occupiers’ choice is very much influenced by urban planning and strategies adopted at local level. Public transport, connectivity to other cities, and quality of life are cited as being important factors in driving investment and retaining staff, with Corporate Real Estate professionals under pressure to deliver creative solutions to suit requirements in cities where landlords’ expectations and quality of real-estate stock are still lagging behind international standards.
The need for more transparency, professionalism and common standards in the market was a common issue in each city, especially in the field of green ratings and codes of measurement.
Thomas Jezequel, EU Policy and Public affairs officer at RICS and author of the report, said:
‘Greater levels of dialogue are needed between occupiers, the real estate profession and local authorities in order to deliver the urban fabric and regulatory framework and allow sustainable growth. City, government and policy decision-makers must monitor how easy it is for businesses to locate in their city and make decisions accordingly.’
Notes for editors
About “Corporate Real Estate in Prime EU Cities”:
Following a first publication entitled ‘Corporate Real Estate : Global Cities and Investment’ released at MIPIM in March 2012, RICS Europe’s network and key members in 13 prime cities within the European Union, including London, Frankfurt, Budapest, Amsterdam, Brussels, Milan, Paris, Warsaw, Madrid, Barcelona, Helsinki, Rome and Dublin, have joined forces to deliver this European edition, based on valuable market intelligence. With this publication, RICS examines which factors are currently determining companies’ location and investment decisions in these prime cities.
The report is available to download here
Key findings per city:
Suffering less from a lack of financing than other EU cities, London and Paris remain core markets for international investors and Frankfurt continues to be dominated by the financial services industry.
About Paris, Philippe Alexis FRICS, Head of French Operations for CLS Citadel suggests that:
“Paris remains a core market for international investors and suffers less from a lack of financing than other EU cities, holding up well despite the crisis and continuing to attract foreign investors. ‘The “Grand Paris” development project should also boost the market in the future.”
As a major metropolis London offers businesses a wide talent pool of prospective employees and a world class standard by service providers. In order to maintain its competitiveness as a location for corporate occupiers London city leaders should consider the challenges of; comparatively high costs of setting up business, the continued requirement for investment in city infrastructure, a historic landlord centric commercial lease structure, and the need to provide assurances to occupiers that future UK government policy will continue to protect London as a suitable location for a headquarters function.
In Frankfurt, the market continues to be dominated by the financial services industry. Thomas Kral FRICS, Vice-Chairman Professional Group Commercial Property of RICS Deutschland said: ‘Frankfurt falls under the global rankings of world famous cities and is the smallest, most cosmopolitan region of Germany. It provides geographical and infrastructural advantages, making it one of the growth regions.’
Across Central and Eastern Europe, the picture is mixed. Budapest is very much influenced by the economic and political uncertainties in Hungary. Michael Smithing FRICS, Director of Green Building Certification at Colliers noted: ‘Budapest combines a well-educated workforce, inexpensive, plentiful office space and an excellent quality of life. We’ve succeeded in attracting a large number of shared service centres by matching the secondary Polish cities on cost and labour availability and beating them on quality of life and infrastructure.’
About Warsaw, Agnieszka Jachowicz MRICS of Arka Investment Funds said: “With the highest GDP growth in CEE, Poland is one of the region’s most attractive investment markets. Banks also perceived it as one of the safest economies and a majority of financial institutions active in Poland are developing their businesses in Warsaw. Banks also perceived it as one of the safest economies and a majority of financial institutions active in Poland are developing their businesses there.’
Barcelona is now reinventing itself as an international knowledge centre but more transparency is needed in the office market. Of Madrid, gateway to South America, North Africa and Europe and economic, political and administrative hub, Luis Martin Guirado FRICS, CEO of BNP Paribas Real Estate Spain suggested: ‘The city has a modern transport infrastructure and a highly qualified and competitive workforce. Secured real estate assets in prime locations are available and constitute truly competitive opportunities.’
Brussels, home of the European Union and up to 500 corporate headquarters, may be hampered in the long-term by its obsolete and under funded public transport infrastructure and unstructured decision making - a risk for a city expected to gain 200,000 inhabitants before 2020.
Amsterdam benefits from its situation in one of the countries least affected by the global financial crisis. The Netherlands are considered as a safe market with excellent conditions to do business. As occupiers are looking to consolidate their activities and maximise their efficiency in their use of space, the high vacancy rate on the Amsterdam market is not expected to decrease. This will be a challenge in terms of urban redevelopment in the coming years, with innovative and sustainable solutions needed.
In Helsinki a small population and market area, as well as special cultural and climate conditions create specific challenges for Finland. On the other hand, the quality of life is considered as very high and competitive, and the society’s stability and security are among the highest in the world. The commercial property market is well-functioning and there are numerous existing supply and development possibilities, which lower the threshold for location decisions.
Transport and planning decisions have left Dublin with a poor land-use system, but clustering of businesses in the Docklands and the International Financial Services Centre have resulted in Dublin becoming one of the world’s most internationally connected cities. The low corporate tax rate has seen many US and global firms open their European offices in Dublin, and their continued presence is largely dependent on the retention of the current Irish and international taxation regimes.
In Rome many corporate occupiers are willing to locate or relocate their activities here but can not find prime buildings up to international real estate standards. Despite particular constraints and heavier costs for the refurbishment of central historical locations, Rome’s market will have to adapt to new requirements in terms of quality space and flexibility if Rome is to progress from its current “secondary location” status for corporate occupiers compared to Milan.
Milan, authorities should reassess their strategy and face the need of a CBD with modern buildings, in order to be more competitive in the eyes of international occupiers currently looking for prime space inside the city limits. Expo 2015 should be exploited by the Milanese authorities as a great opportunity to invest in the city infrastructure and to be an accelerator of urban renewal processes. The event is expected to contribute to positioning Milan as a new cultural, research and creativity hub in Europe.
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