Timing is everything - and the time to invest in countries which experienced the worst downturn is now for developers and investors seeking first mover advantage, according to Simina Istrate, of Colliers International and Jason Karr of Karr Consulting Ltd, at the International Council of Shopping Centers' (ICSC) Romanian Retail Real Estate Conference in Bucharest last week.
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Simina Istrate, Colliers International.
The lowest point for the retail real estate industry was mid-2009 with Romania experiencing the biggest decrease in GDP of all the EU countries, but according to Jason Karr, an experienced developer, project manager and investment adviser in retail real estate across Europe and Russia; this should be viewed positively.
"In previous retail real estate cycles it's the countries which experience the most severe drops, which often offer the greatest opportunities for rapid recovery and growth," he said.
In a Colliers International Global Investor survey of 150 investors, more than 90% said they expect to start actively investing in mature markets within six months, and in the less mature markets across Central and Eastern Europe, within 12-18 months.
But investment in these less mature markets especially could be speeded up even more if investors and developers put their pride aside and work together, syndicating new schemes to produce one high-performing scheme rather than developing competing projects alongside each other, as had been the case in some areas where speculative, poorly planned development had become a significant problem.
Jason Karr also urged developers and investors seeking new investments, but without access to the necessary cash and with banks still not lending, to dilute some of their equity in existing schemes by selling to new investors. This, he said, would deliver cash to invest and develop elsewhere and give the wider economy a welcome boost.
While there are many positives for those investors and developers brave enough to commit, there are challenges too.
"There continues to be a lack of debt equity, but for developers who can secure investment, if the debt gets too high then they should structure the loan in order to refinance if necessary," said Jason.
Simina added: "While retail tenants are more difficult to secure at the moment, the near complete stop of new development will mean a deficit of good quality retail space in the future when there will be a scramble for whatever space they can find."
Source: Nicky Godding
"In previous retail real estate cycles it's the countries which experience the most severe drops, which often offer the greatest opportunities for rapid recovery and growth," he said.
In a Colliers International Global Investor survey of 150 investors, more than 90% said they expect to start actively investing in mature markets within six months, and in the less mature markets across Central and Eastern Europe, within 12-18 months.
But investment in these less mature markets especially could be speeded up even more if investors and developers put their pride aside and work together, syndicating new schemes to produce one high-performing scheme rather than developing competing projects alongside each other, as had been the case in some areas where speculative, poorly planned development had become a significant problem.
Jason Karr also urged developers and investors seeking new investments, but without access to the necessary cash and with banks still not lending, to dilute some of their equity in existing schemes by selling to new investors. This, he said, would deliver cash to invest and develop elsewhere and give the wider economy a welcome boost.
While there are many positives for those investors and developers brave enough to commit, there are challenges too.
"There continues to be a lack of debt equity, but for developers who can secure investment, if the debt gets too high then they should structure the loan in order to refinance if necessary," said Jason.
Simina added: "While retail tenants are more difficult to secure at the moment, the near complete stop of new development will mean a deficit of good quality retail space in the future when there will be a scramble for whatever space they can find."
Source: Nicky Godding
