Tell us about yourself and what you do at EY.
I’m heading our EMEIA Real Estate practice, which is one if the three areas making up our Global Sector and covers Europe, Middle East, India and Africa. People always get surprised because it is a big territory to look after, but we have very strong local leaders in all the countries, so I can really focus on markets that need more attention or offer opportunities for growth, for example emerging markets.
Last year I spent a lot of time in India, Africa, Russia and the Middle East, whether it’s Dubai, Saudi Arabia or Turkey. We have good and knowledgeable people in the field on all these markets, but if they feel they need help in strengthening their footprint they may call on me to tap from the resources our EMEIA and Global sector can offer them. I also pay attention to many mega accounts which we try to support from our EMEIA and Global sector. So primarily I would say I do – in close cooperation with our Global Sector Leader - market and business development and offer our people support with serving our biggest clients. In fact this role demonstrates that our Real Estate sector is fully and truly globally integrated.
What’s your view on the European property market? Is Europe back on the way to recovery?
I‘d like to think that Europe is on the way to recovery, you see more optimism and some very positive signs on the market, transactions are picking up, but still only in selected markets. Maybe the number of markets that people invest in has increased a bit—last year it was only the UK, Germany, France and a bit the Nordics, while now you see more interest in Poland, the Czech Republic, Italy, Ireland and Spain, but there’s still a lot of markets that are left behind, like many other CEE countries. It looks like the economy is on the way back, but we are still not there. If you look at transaction volumes they’re still far behind the peak of 2007.
People are still looking for core products or still chasing distressed opportunities, and secondary markets are only slowly picking up. There are a lot of good signs, especially if you listen to the economists today. Also here at GRI nobody talks anymore about the potential collapse of the euro, whereas last year that was still the talk of the day. There are still a lot of things to be done; we need more liquidity in the market, especially on the debt side but it seems to be moving in the right direction. Also property fundamentals still need to improve. There may be more capital flowing into European real estate but that does not automatically mean that vacant properties get tenanted.
What about the Dutch market?
The Dutch market is sort of a special case. If you look at it from an economic perspective the Netherlands is still a very strong country. However, the property market was absolutely overdeveloped before the crisis so we have too much supply. A lot of attempts are being made, municipalities are scaling down land that is earmarked for property developments and a group of Real Estate professionals tried to set up a fund which could then subsidize taking properties out of the market. However, that did not work because of competition discussions and a lack of support from investors.
We therefore may need some very effective measures to reduce vacancies in an orderly and faster way. Office vacancy is still high and retail vacancy is increasing but fortunately we also still see new developments and very sizeable and successful refurbishments. Due to the size of the market and the level of vacancy, the Dutch market perhaps has a longer way to go than a number of other European markets but it still offers opportunities.
What are the latest developments in EU legislation and how do they affect the market?
EU regulations have a very big impact on the sector. I think that regulations are actually hindering the growth of the property industry and as a famous economist once said regulations could cause another crisis by themselves. I am not saying that is the case, but it highlights how important regulations have become. Four years ago the sector only identified some six EU regulations which affected the real estate industry directly or indirectly; today they are 25.
For example, regulations such as the Alternative Investment Fund Managers Directive and Solvency II are really not beneficial for the real estate sector. Nowadays there’s a lot of talk about how we can boost the listed sector and one of the reasons why that is difficult is the regulations themselves. If we don’t facilitate insurance companies to invest in listed real estate and instead punish them with a huge capital charge that won’t really stimulate the listed sector. Likewise the absence of a European REIT platform is a barrier for growth of the listed sector.
How should the real estate industry act to improve these regulations?
I think we need better discussions and communication in an earlier stage between those who prepare the legislation and those who are regulated by them. Many of these regulations are based on the perception that the real estate sector caused the crisis so we should ‘punish’ this sector. However, real estate is very important for the economy; everyone needs real estate—a place to work, a place to live, a place to shop. I am not saying necessarily that the EU or national governments are doing a bad job, but it is important that regulators consult sector representatives before they draft the legislation rather than after, when things are quite difficult to change and repair requires huge concerted lobby efforts.