Jones Lang LaSalle has announced the appointment of Will Heigham as an Associate Director in its National Office Agency Tenant Representation team based in London. In his new role he will be providing consultancy, acquisition and disposal advice to office occupiers across the South East, South West, East Anglia and the Midlands.

Will brings a broad range of commercial real estate experience with him, having spent over 10 years working in the City of London advising corporate occupiers on their property strategy and more recently working regionally before joining Jones Lang LaSalle. His appointment follows the recent recruitment to the team of Jamie Stewart-Liddon from Robert Irving Burns.

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With over £2 billion of transactions exchanging in the past three weeks the Central London commercial property market continues to show its resilience and attraction to overseas investors.

Stephen Down managing partner of specialist central London investment consultancy Gresham Down Capital Partners said: “Five weeks ago the fear was that there was too much stock on the market but the appetite of buyers has been voracious.

“US opportunity fund Carlyle has just bought six London office buildings, comprising the White Tower portfolio, from receivers for over £670 million. Gresham Down itself has been advising a private Eastern European investor who has just acquired Mitsubishi Estate Company’s Bow Bells House, a trophy City asset for £140m.”

Down is also advising a group of investors selling River Court, the £300m European headquarters of Goldman Sachs in the City. “This is a good example of the type of trophy stock that appeals to the overseas market,” says Down.

“It has been owned by the same group since it was developed in 2000 and is let to Goldman Sachs for another 15 years. It is a modern Grade A building secured to an international tenant on a long lease and the rent is low at only £36.00 per sq ft overall compared with recent lettings on similar space at over £50.00per sq ft. It offers the investor access to the growth in rents over the next three to four years”.

Down says given the current scarcity of debt recent buyers have tended to be equity rich. But River Court “unlike other deals comes with a fixed interest debt until 2016 representing over 80% of the purchase.”

Office rents in the City of London have risen by almost 12% over the past 3 months and by 24 % in the past six months. The downturn led to a collapse in construction starts in the City. This has resulted in tenants now finding themselves in bidding wars over the dwindling supply of Grade A space, which is driving up rents.

Down highlights recent Qatari acquisitions such as Harrods in Knightsbridge for over £1.5 billion and Park House in Oxford Street a prime commercial and residential development, for £500 million, as further evidence of the weight of money looking to invest in trophy London assets.

He says there is also increasing evidence that Malaysian, Korean and Chinese investors are running their slide rules over Central London property. “Chinese entrepreneur Joseph Lau has been reported at the preferred bidder on the £300 million Tower 42 but we know there are a number of other Far Eastern institutions and private investors that have targeted London because of the liquidity and transparency of the market but also because of the weakness of sterling.”

Down believes the appetite for London will remain strong but he offers some advice to investors seeking to get into the market. “First, stick to the very best in class - that is where the rental growth will provide the performance. Second, work with advisors who have a strong reputation for performance. Unfortunately there are too many intermediaries with little or no experience messing investors around at the moment.”

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DTZ Research has appointed Fergus Hicks as Associate Director in the Global Forecasting & Strategy Research team. Reporting to Tony McGough, Global Head of Forecasting & Strategy Research, Fergus will support DTZ Research’s quarterly forecasting of 192 real estate markets worldwide and be responsible for developing bespoke modelling and analysis of emerging real estate trends. Fergus joined DTZ on 12 July 2010.

Fergus joins DTZ from Capital Economics where he was a Property Economist specialising in European commercial property markets. Previously, Fergus was Head of Forecasting and Economics for the EMEA region at Jones Lang LaSalle, a Senior Analyst at DTZ and an Economist at the RICS.

Fergus is a member of the Society of Property Researchers, the Investment Property Forum and the Society of Business Economists. He holds BSc and MSc degrees in economics from the London School of Economics.

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New research from Jones Lang LaSalle’s global capital markets experts has found that preliminary global direct commercial real estate investment volumes reached US$66 billion in the second quarter of 2010. While this level is similar to the first quarter 2010, it nearly doubles the levels of the market bottom one year ago. For the first half of 2010 global direct commercial real estate investment volumes totalled US$130 billion.

Arthur de Haast, Head of the International Capital Group (ICG) at Jones Lang LaSalle commented: “This is solid progress for commercial real estate investment markets, reflecting the pick up in trading which we have witnessed in certain countries globally. That said, volumes are still well below pre-credit crisis levels, and since third quarter 2009 incremental growth has been relatively modest.”

He continued: “For the full year we anticipate volumes globally of around US$300 billion, which represents a healthy 40 to 50% increase on 2009. This is still less than half the pre-credit crisis levels of 2006 and 2007, but we must take into account the fact that those were heady years for commercial real estate investment, with unprecedented record trading volumes.”

Jones Lang LaSalle’s capital markets research found that significant regional differences have emerged in Q2 2010:

Asia Pacific has seen a 34% quarter-on-quarter decline in investment volumes in Q2 to US$15 billion, with notable falls registered in Japan, China and Australia, while Hong Kong and Taiwan saw an increase. Compared to the same quarter last year, volumes were up by 21% (from US$13 billion during the same period in 2009).

Stuart Crow, Head of the firm’s Asia Capital Markets Group commented: “In Asia Pacific, the first half of 2010 has posted reasonably strong increases over the corresponding periods of 2009. If this trend continues, aggregate volumes could be around 30% higher this year to reach the mid US$80 billon range.”

In Europe, Middle East and Africa (EMEA) the second quarter has seen a modest 15% increase in volumes on Q1 to €23 billion, which is up 80% on a year ago (in euro terms). In US dollar terms, volumes totalled US$29 billion, up 5% on the quarter and 70% over 2009. The UK accounts for over 40% of EMEA volumes, while London maintains its position as the world’s most active market with volumes close to US$5 billion, though investors are increasingly focusing on France, Germany, the Nordics and Poland. In EMEA, Jones Lang LaSalle expect investment volumes will be 35% higher in 2010 compared to 2009, reaching the €100 billion (around US$130 billion) mark at year-end.

Julian Stocks, Head of Capital Markets England at Jones Lang LaSalle, said: "We have seen a strong bounce back in activity and pricing so far this year - especially for prime London. However in the last few weeks I have noticed a slight change in sentiment and the balance between buyers and sellers has altered. I expect yield movement to be minimal for the next few months and turnover in England to be slightly ahead of 2009.”

The Americas have seen a sharp uplift in volumes in Q2, but from a low base. Volumes have risen by 54% to US$ 21 billion on Q1 and are more than quadruple the $5 billion level of Q2 2009. Quarter over quarter growth in Canada and Brazil outstripped the United States.

Steve Collins, Head of the ICG in the Americas said: “Globally, the strongest growth has been recorded in Brazil, where volumes have tripled on Q1 to US$1.6 billion, and are now at record levels. Canada has also seen strong improvement on the quarter doubling to US$3.5 billion.”

In the meantime, investor demand also continues to be strong for core assets in the United States, but the lack of product supply continues to hinder direct investment volumes. Collins expects a stronger sales environment in the United States as more product is already coming online and is expected continue to increase through the third and fourth quarters.

“We expect total transaction volume in the Americas region for the full-year 2010 to increase by at least 80% over 2009 and reach the US$80 to 85 billion range,” concluded Collins.

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Vienna International Airport handled a total of 1,822,444 passengers during June 2010, which represents an increase of 10.5% in comparison with June 2009.

Flight movements rose by 2.7% and maximum take-off weight (MTOW) by 14.3%, while cargo increased 25.4%. The number of transfer passengers was 16.7% higher in June 2010 than in June of the previous year.

The number of passengers travelling to Eastern Europe rose by 14.6% over the comparable prior year period. Passenger traffic to Western Europe grew by 8.9%. Traffic to the Middle East was 18.2% higher in June 2010.

From January to June 2010, the number of passengers rose by 5.5% over the comparable period in 2009.

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The Hungarian hotel market continued to feel the negative effects of the economic crisis in the first half of 2010, although there were signs of improvement compared to the lows of 2009, the worst year in a decade. Nevertheless, the improving figures failed to translate into more revenues for operators, primarily due to lower room rates. The popularity of holiday vouchers did not falter, and dozens of new, mostly four-star hotels are expected to be handed over later this year – as summarized briefly by Ákos Balla, Director of Valuation and Research at the Hungarian office of Colliers International.

The moderate increase in overall guests did help to marginally improve occupancy rates to 39 percent, a one percentage point increase from the previous year. Within this, occupancy at five-star hotels grew to 53 percent, while at four-star hotels it rose to 44 percent.

A further positive development worth mentioning is that the holiday voucher has falsified negative predictions of the implementation of new taxes on it as its demand nor its position as a major driver of domestic tourism was affected by the tax. In the first five months, more holiday vouchers were bought than in the year before, and their use as payment at hotels also increased.

Looking ahead, a positive sign for the industry is the new government’s declaration of making tourism one of its main focuses, with a large role to be played in providing promised new jobs. Specific plans are yet to be announced, but the industry has repeatedly signalled a need to reduce the relatively high tax rates associated with services, as they put Hungary at a disadvantage. – drawn to attention by Akos Balla.

The developments in terms of the market is optimistic: In terms of new hotel developments, the total supply of rooms increased by 820 in Budapest this year, with another 470 expected by the end of the year. Most of these affect the four-star category — since 2008, the number of four-star hotels in the capital has increased by 12. Besides the capital, there were or will be completed hotel projects this year in Pécs, the European Capital of Culture for 2010, Gárdony, Gyula, Sopron and Zamárdi .

Lake Balaton represents big tourism potential, with SCD Group, the main developer active in the area, well-prepared to follow through on large-scale development plans once the market environment improves. The firm has also bought and reopened the Fly Balaton international airport in Sármellék, with a view toward exploiting the synergies in bringing tourists to the area and providing accommodation for them.

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Emmerson Market Research Department published the latest edition of quarterly reports presenting current situation on the housing markets of key Polish cities. The primary market offer has increased in all cities taken into account i.e. Warsaw, Krakow, Wroclaw, Poznan, Lodz, Gdansk and Katowice. Whereas in Katowice and Lodz the growth was minimal (0.4% and 0.6% respectively), the number of apartments offered by developers in Poznan has raised as much as 24% quarter on quarter. The current offer on the Warsaw primary residential market is made up with almost 14,700 units what is undoubtedly the biggest number of units among all the largest regional markets in Poland. It exceeds cumulated sum of apartments offered in Krakow, Wroclaw and Gdansk jointly (three largest regional markets after Warsaw).

Within Q2 2010, average prices dropped on all analysed markets except from Katowice, where 1.8% increase was observed which drove the price to the level of PLN/sqm 5,373 comparing to Q1 2010. The most clear price decline (3.1%) was registered in Poznan, where the average price plunged below the PLN/sqm 7,000 level as a result of introduction of a significant number of new, cheaper apartments. The current average price of units offered on the Warsaw primary market amounts to PLN/sqm 9,002 and is definitely the highest comparing with the other largest cities of the country. In Krakow, the second city according to the price level on the primary residential market, the average price stood at PLN/sqm 7,672 at the end of Q2 2010. In the remaining cities, which are subject to the Emmerson quarterly monitoring, price levels are considerably lower. The average price in Wroclaw is lower by approx. 425 PLN/sqm than analogue value recorded in Krakow. In Katowice and Lodz, which are the cheapest ones among cities taken into account, the average prices set at the level below PLN/sqm 6,000.

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Central and Eastern European (CEE) commercial real estate investment turnover reached €1.7 billion in the first half (H1) of 2010, a 190% increase compared to activity levels recorded in H1 2009, according to the latest data from CB Richard Ellis (CBRE). On a quarterly basis, investment activity in the region rose to €970 million in the second quarter (Q2) of 2010, an increase of 34% compared to volumes seen in Q1 2010, but still considerably lower than the levels seen in the period before Q4 2008.

Of the €1.7 billion transacted in H1 2010, German Open-ended Funds (GOEFs) have accounted for €300 million, or 17%, of CEE investment so far this year. Jos Tromp, Head of CEE Research & Consulting, commented: “This level of activity is remarkable, especially in light of the turbulence in the GOEFs sector and continuing economic uncertainty across Europe. RREEF’s acquisition of the Grunwaldzki Center in Wroclaw, Poland, provides the most recent evidence of continued GOEF interest in Central Europe, and represents the first office acquisition by a GOEF in a regional CEE city this year.”

Apart from interest from GOEFs, some other market players are showing increased activity as well. CA Immo, one of Austria’s largest listed property companies, announced the takeover of the Europolis portfolio. The reported value of the portfolio is around €1.5 billion and is spread across the CEE region. The closure of this transaction is expected in early 2011.

Continuing the trend seen in Western Europe in recent months, yields in CEE have come under downward pressure. Some markets registered compression in prime shopping centre yields in Q1 2010 on the back of increased confidence in retail investment products in CEE. The office market followed in Q2 2010, with prime yield compression in many markets. The yield gap between prime asset classes has remained mostly unchanged. Prime pricing is at similar levels for offices and shopping centres, while prime industrial assets generally have yields 150-200 bps higher.

Geographically, CEE H1 2010 investment activity was concentrated in Poland, the Czech Republic and Russia; however, mainly outside the prime segment. “Most prime yields compression reflects a change in sentiment and is not backed by transaction evidence yet,” added Tromp. “Despite the current shift in prime yields, there is still a difference in the trend for pricing between prime and secondary properties.”

Significant market differences are emerging across the region as market fundamentals begin to indicate the future of capital value movements. Central European markets seem to have left the worst of the downturn behind. Changes in prime yields are positively influencing capital values in this part of CEE. Capital values grew even more in Eastern European cities in Q2 2010, compared to the previous quarter, because the compression in prime yields was coupled with an increase in prime rents. Conversely, some cities in South-Eastern Europe have seen decreasing prime rents and stable prime yields, resulting in a decline in prime capital values in Q2 2010 compared to the previous quarter.

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The Dublin office of CB Richard Ellis Group today launches their second quarter Dublin Office Market View Publication, which identifies and analyses trends in the Dublin office sector from April 2010 to June 2010. The report indicates an encouraging level of letting but the medium to longer term outlook remains uncertain.

Report Highlights
• €60 million of office investments sold in Dublin during Q2 2010, while prime office yields remain stable at approximately 7.5%.
• A healthy level of office take-up achieved in Dublin in Q2 2010, bringing total take-up in the city in the first half of the year to almost 50,000m2.
• Occupiers remain extremely cost-conscious, are focused on turnkey solutions and are showing a preference for fully fitted accommodation.
• Despite the fact that there is a large amount of vacant office accommodation in the capital, with the overall vacancy rate at 23.5% as of the end of Q2, much of this comprises floors in otherwise occupied buildings as opposed to empty buildings.
• There are no new office developments to come on stream in Dublin after the end of 2010.
• 79% of current demand focussed on city centre properties.

Willie Dowling, Executive Director at CB Richard Ellis, commented “There has been an encouraging level of letting activity in the Dublin office market in recent months and we are on target to beat last year’s take-up level of 78,500m2. However, despite the fact that transactional activity in the Dublin office market has been holding up well over recent quarters and there is a good level of active requirements, the medium to longer term outlook still remains uncertain. Further consolidation in the financial services sector is a real threat while additional Government austerity measures are concerning. The three vital ingredients for a properly functioning office market - meaningful job creation, rental growth and the availability of funding - are all unlikely to materialise for some time. In the interim, the office sector will remain primarily reliant on company expansions and relocations and with little net absorption occurring, vacancy rates will remain high”.

According to the new report, Dublin office letting activity remained consistent in Q2 2010, with 24,652m2 of take-up recorded in the period, compared with 24,954m2 of lettings signed in the first three months of the year. This represents a 6% increase in take-up levels on an annual basis while recent quarterly take-up is more than double the level of quarterly letting activity achieved in the Dublin market in 2009. There were 35 individual office letting transactions signed in Q2 2010, the majority (19) of which were lettings of 450m2 or less. Only three lettings signed in the period extended to more than 1,858m2 in size. At this point, CB Richard Ellis predicts that the Dublin office market is on target to beat last year’s level of take-up of 78,500m2. They say that there is additional demand for as much as 109,000m2 of office accommodation in the capital at present, of which 79% have a preference to locate in Dublin city centre. Prime rents in the city centre are stable at €376 per square metre although rents for secondary accommodation and office properties in the suburbs remain under downward pressure.

The combination of an uncertain economic outlook, high vacancy rates and constrained access to development finance mean that the start of the next development cycle in Dublin is still some considerable way off according to CB Richard Ellis, who point out that after 2010, there are no new office schemes scheduled to be completed in the Dublin market. The property consultants say that even through prime rents are stabilising and the economy is showing some signs of improvement, it will take some time for speculative development to resume, even if the availability of development finance improves. If developers (and those funding them) remain cautious and refuse to develop new schemes without first securing pre-lettings, this will ultimately have implications for occupiers.

“Despite the fact that there is a large amount of vacant office accommodation in the capital with the vacancy rate now at 23.5%, much of this comprises floors in part-occupied buildings, meaning the availability of new office buildings in the central business district will continue to decline over the course of the coming quarters as lettings continue to occur” said Willie Dowling.

In addition to good levels of letting activity in the office sector, the property consultants point to good demand for prime office investment properties in the capital and report €84 million in investment deals were signed in Q2, which brings total investment spend in the first six months of 2010 to €103 million. For the first time since Q2 2009 there were office investment deals in the quarter, with €60 million of office investment signed in the last 3 month period.

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