Press centre Expert comments

UNITED STATES

Chris M. Smith

Shearman & Sterling LLP

“Demand for real estate product continues at a fever pace and it remains a favoured asset class. Available capital – whether constituting first lien or mezzanine financing or preferred or subordinate equity and almost regardless of the nature of the investment – remains plentiful. Construction lending has become somewhat scarcer, with institutional lenders limiting construction loans to projects undertaken by well-known sponsors in major markets. Interest and cap rates remain low. CMBS has bounced up and down and when it shows signs of effectively withdrawing from the market loan funds – primarily for mezzanine debt – have been created and stand available to fill the gap albeit at somewhat higher rates.”

UNITED KINGDOM

Jonathon Wilkes

Stephenson Harwood

“In 2014, the market found the spark that had been missing since 2008 and, since then, has been riding that wave. There have been a number of very high profile and high number deals, but the real story is the sheer volume of transactions. Properties that would have been hard to shift in the recessionary years have been snapped up and the banks have been keen to lend; access to finance is no longer a stumbling block for good clients with good deals. Against that ‘good news’ backdrop, there is more nervousness now than there was six months ago, and the SDLT hike is unwelcome, but many investors remain active.”

GERMANY

Carsten Loll

DLA Piper

“The major real estate trend in Germany has been the continued growth of the logistics sector. The importance of the logistics sector for the real estate market is no surprise when you consider the current rise in prices and the poor availability of prime assets. Logistics centres are located in lower priced regions and, due to the growth of the online retail sector, they are a welcome alternative to traditional retail assets. Another trend is that investors’ fears that rent cannot be increased as quickly as asset prices, has also lessoned in recent months. As the difference, however, between the increase of asset prices and rent continues, investors will search for other investment alternatives, such as in hotels and student housing.”

SWITZERLAND

Hans-Ulrich Brunner

Prager Dreifuss Ltd

“To start, we would make two introductory remarks. First, the acquisition of residential real property in Switzerland is restricted for foreign individuals and companies, although exceptions apply, such as for citizens of the European Union. There are no restrictions with respect to commercial real estate property. Second, Switzerland’s real estate market is very segmented, with regional peculiarities playing an important role when deciding on investing in real estate. Real estate segments in Switzerland develop very differently. On the one hand, we have seen substantial investments by real estate developers and institutional investors in residential property – both owner-occupied and rental, in particular higher density complexes. With respect to office space, we note that rental demand is lower than supply, resulting in rather attractive conditions for potential lessees in terms of reduced rates and flexibility in rental terms.”

PORTUGAL

Filipa Arantes Pedroso

Morais Leitão, Galvão Teles, Soares da Silva

“To start, we would make two introductory remarks. First, the acquisition of residential real property in Switzerland is restricted for foreign individuals and companies, although exceptions apply, such as for citizens of the European Union. There are no restrictions with respect to commercial real estate property. Second, Switzerland’s real estate market is very segmented, with regional peculiarities playing an important role when deciding on investing in real estate. Real estate segments in Switzerland develop very differently. On the one hand, we have seen substantial investments by real estate developers and institutional investors in residential property – both owner-occupied and rental, in particular higher density complexes. With respect to office space, we note that rental demand is lower than supply, resulting in rather attractive conditions for potential lessees in terms of reduced rates and flexibility in rental terms.”

RUSSIA

Igor Chumachenko

Vegas Lex

“The last 12 to 18 months were marked by significant changes to regulations regarding construction activity, land legislation and acquisition of rights to real estate in Russia. The recent amendments were aimed at optimising administrative procedures in development activities and enhancing cooperation between public entities and developers. In particular, the amendments affected procedures to allocate land plots for construction, state registration of rights to real estate, regulations governing integrated area development projects and the realisation of private-public partnership projects. Consecutive steps are being made to reduce administrative barriers, including a conversion to electronic document flow, and reducing the time it takes to obtain approvals for construction projects.”

TURKEY

Omer Kesikli

Kesikli Law Firm

“The real estate market in Turkey is promising, despite the impact of the recent political crisis and the instability in neighbouring countries. Offering ever-greater opportunities for investors every year, the Turkish real estate sector has come to prominence in the last decade. Turkey has an important geographical and geopolitical location connecting Asia to Europe. It is expected that office demand will continue to increase due to the fact that multinational companies have been establishing their regional management and operational centres in Istanbul. After withdrawal of the reciprocity requirement for foreign buyers’ purchasing real estate in Turkey, the number of nationalities permitted to buy real estate in Turkey materially increased.”

INDIA

Vivek K. Chandy

J. Sagar Associates

“Over the past two years, the real estate sector has seen a noticeable increase in investments being made in the form of structured debt – mostly secured non-convertible debentures (NCDs) – as opposed to investment in equity instruments. Investment in NCDs seems to meet the requirement of both the investor as well as the developer. For developers, NCDs offer tax optimisation without dilution of promoters’ equity. Similarly, NCDs are an attractive form of investment for the investors given that the interest or coupon payments are received at regular intervals and the NCDs are typically secured by a charge over the assets of the developer, the value of which is usually 1.5 to 2.5 times the investment.”

SOUTH AFRICA

Gawie Kolbé

KPMG

“South Africa implemented a Real Estate Investment Trust (REIT) regime in 2013/14 through specific REIT tax legislation for listed property companies and trusts. Through its Listings Requirements, the JSE Limited regulates REITs which have a market capitalisation of around R450bn. Tax clarity now exists, which saw a large number of new listings during the past two years. This further contributed to a significant increase in foreign investment in South Africa’s real estate sector. The operating environment has been difficult with poor service delivery by local authorities and significant increases in administered costs such as property rates and taxes, as well as electricity. The combination of these factors places significant pressure on net property income. Acquiring local quality assets remained challenging with real estate players focusing even more on diversifying offshore.”