Summertime Blues

There was a time not too far back when summertime really meant holiday time for those working in European Real Estate. Then came 2005 -07 and the markets carried on regardless. We all remember that relentless drive to place capital no matter how low the yields had fallen. The beach could wait. This was “get rich quick” time and the market’s momentum looked unstoppable.  More deals were done in Q2/Q3 2007 than in any comparable length of time in history. But then we had the credit crunch.  Summer 2009 was the slowest on record, a summer with virtually no deals completed or originated. Investors counting their losses and many choosing not just long vacations but career breaks. There was no end in sight to the mountains of debt and the falling values. Fortunes and reputations melted away faster than ice creams on the beach.

What’s summer 2010 going to dish up?

Even though Q2 deal flow was up, I’m not optimistic that the European markets have turned the corner. The fundamentals (rental markets) are weak, the Euro is under pressure and its payback time for property debt, consumer debt, and sovereign debt Europe-wide. I fully expect the market to take a long break again. And return fingers crossed, hoping that the September sun is not already setting fast on a real estate market not yet set ready for recovery. I worry they will be disappointed and if I’m right then Asia Pacific in Q4 begins to look increasingly attractive. Not just for the winter sun. I hear some are already booking their tickets. Not just for the winter break from the European cold but to seek opportunities in the world’s fastest moving real estate market. Presumably those who fondly remember the summer of 2007, but hopefully having learned the lessons of excess too.

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