Emerging Trends in Real Estate® Europe 2012 - PwC

The near-term future for the real estate capital markets
has rarely been more uncertain than it is today,
owing to both the continuing financial crisis and the
introduction of new financial regulations. When the interviews
for this report were conducted during November and early
December 2011, the future of the euro was hanging in the
balance, with several countries within the Eurozone facing the
possibility of ejection from the single currency. A number of
interviewees took the view that although they could not see
the euro collapsing, the situation had rapidly become a case
of the politicians versus the markets. As one commented:
“The politicians want to edge slowly through to a solution. The
challenge is that the markets are not giving them the time.”
Paralysed by Economic
Uncertainty
Many of those interviewed described the difficulties that they
were having modelling the possible scenarios for the euro
and how that would affect their businesses. None provided
a particularly appealing outcome. As one interviewee noted:
“Even with an orderly solution, the prospects are not good.
Our most optimistic scenario is zero growth for many years to
come, with a significant possibility that it could be very bad or
even worse. We could see a major recession across Europe.
This is going to be as bad as the period following the Lehman
collapse.” In addition to the consequences of economic
stagnation for the occupier side of the equation, which are
discussed in chapter 3, the profound economic uncertainty
is affecting providers of equity and debt directly. Three
chapter 2
Real Estate
Capital Markets
“Even with an orderly solution, the
prospects are not good.”
years after Lehman, the uncertainty over the level of banks’
exposure to sovereign debt default coupled with uncertainty
over the regulatory changes introduced as a result caused
significant elements of the capital markets to be reduced to a
ExHIBIT 2-1
Views on the Impact of Sovereign Debt Crisis on
Real Estate Businesses in 2012, by Business Type
Increase Stay the Same Decrease
Bank, Lender, or Securitized Lender
67% 15% 18%
Publicly Listed Property Company or REIT
62% 28% 10%
Institutional/Equity Investor
59% 18% 23%
Fund/Investment Manager
59% 19% 22%
Private Property Company or Developer
58% 15% 27%
Real Estate Service Firm
53% 31% 16%
0% 20% 40% 60% 80% 100%
Source: Emerging Trends in Real Estate Europe 2012 survey.
Emerging Trends in Real Estate ® Europe 2012
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