Despite a weakened European commercial property investment market in 2008, sales of commercial real estate by occupiers remained an important source of activity last year. Although there was a sharp fall-off in the amount of public sector real estate sold in 2008, owner-occupier sales maintained their approximately 19% share of the total investment market in 2008, according to figures released by CB Richard Ellis (CBRE).
As in 2007, there were some very high profile sale and leaseback transactions during 2008. At the end of the year, Italian banks Intesa Sanpaolo and UniCredit each sold corporate real estate assets valued in excess of 800 million. This continued a trend of bank property sales set at the beginning of the year by Banco Santander's disposal of its Madrid HQ, the final part of a multi-stage disposal.
These are not isolated examples of banks selling part of their corporate real estate in 2008. Other significant deals last year included:
- Caixa Galicia 250 million Spanish Portfolio
- BNP Paribas - 250 million - Avenue Kléber, Paris
- Banco Popular - 127 million Buildings in Madrid and Barcelona
Large transactions involving banks were far from the only sale and leaseback activity in the market. In total there were around 600 transactions involving sales by owner-occupiers in 2008. The average deal size was around 33 million, only slightly larger than the 28 million average lot size for the market as a whole. Transactions took place across the full range of property types, including offices, shops and industrial space. The geographic range was also wide, with deals recorded in 20 of the 26 European countries covered by the data.
The geographic spread of sale and leaseback transactions has broadened significantly over the last few years. Two years ago the biggest three markets (Germany, UK and France) accounted for 70% of all sales by owner-occupiers. In 2008, the top three markets (Germany, UK and Spain) made up only 59% of total activity.
In 2008 sale and leaseback activity was particularly high in Spain and Italy, largely due to the transactions involving the banking sector, as described above. The highest level of activity in 2008 was in Germany, as was also the case in each of the previous two years.
Looking ahead, it is likely that sales by owner-occupiers will continue to be a significant part of the European real estate market. The credit crunch has had a significant impact on the ability of companies to raise money from other sources bank loans or corporate bond issues and on the cost of raising this capital. Therefore, even at the lower capital values currently achievable in the market, real estate sales can be the most cost-effective option.
John Wilson, Head of CBRE's Corporate Strategies Group for EMEA said: "The corporate market now accepts sale and leasebacks as a sound and competitive source of capital. Growth is being driven by three factors: corporates bridging the current equity gap for specific business initiatives; the more significant corporates creating liquidity within their own balance sheet -- creating a "war-chest" to reduce reliability on banks to improve their own speed of action -- and investors increasingly recognising the opportunity for what are effectively strong-performing asset-backed bonds with quality covenants."
Adrienne Konthur, Managing Director of CBRE Budapest added: Owner-occupier sales are not yet evident in Central and Easter-Europe. Only 1.2 billion of owner-occupier sales took place in CEE last year, accounting for only 13% of the total volume. This is mainly due to the fact that the CEE markets are still relatively immature and most multinational companies in the region tend to rent."