With most people in the U.S. traveling and planning for the long Thanksgiving weekend ahead, we focus in the edition of Situs NewsWatch on European Commercial Real Estate. Please email us, we’d like to hear what you think.
Banks Exiting UK Due to Brexit – Not So Fast
Banking executives are softening their warnings that Brexit will spur an exodus of staff from London.
Bloomberg reports bankers are gaining confidence that U.K. Prime Minister Theresa May will be able to secure a lengthy transition period that would carry them over from the current rules to whatever fresh terms of trade are agreed with the EU.
As for how all this is affecting Commercial Real Estate: Situs Managing Director Chip Good says, “People in the industry are simply working hard and yes there are properties being bought and sold.”
The shift in tone, also evident from banks including JPMorgan, Chase & Co. and Barclays PLC, comes after May sought to quell fears in the finance industry that her government wouldn’t fight to protect it from the fallout of Brexit when negotiations begin early next year. Bank of England Governor Mark Carney also called this week for a long transition period to give banks a chance to adapt.
“In all markets there are winners and losers,” says Good, who oversees Situs’ European Business Development. “There’s a big demand right now for CRE from people who have the money either to put into loans or to buy real estate assets.”
“Wait and see is UBS’s attitude toward Brexit,” UBS Group AG Chairman Axel Weber said at a conference in the U.K. capital. “No doubt London will remain an important financial center. UBS will be here.”
“Nobody wants to make a bad decision by moving quickly with the amount of uncertainty around,” Daniel Pinto, JPMorgan’s head of corporate and investment banking, said in an interview. “We will be ready to make a permanent decision once we have a better idea of the direction of travel.”
Italy’s Looming Bank Crisis
Italy’s banking problems continue to spiral out of control.
Nearly one-fifth of all loans in the Italian banking system are classified as troubled, a total worth 360 billion euros, or nearly $400 billion, at the end of last year, according to the International Monetary Fund. That represents roughly 40 percent of all the bad loans within the countries sharing the euro.
“Italy’s known about these problems for going on nine years and has done little to solve them” says Situs’ managing director Prasad Chaganti. “The European Central is expected to publish guidelines on Non-performing loans early next year and it will be interesting to note their observations. Italian banks Intesa Sanpaolo and Banca Monti Dei Paschi di Siena are gearing up to deleverage their books and if those trades go ahead as planned, it could trigger more activity in the Italian markets”.
The New York Times says Italy is the perpetual threat that could, at any moment, present the world with an unpleasant surprise potent enough to send legions of officials descending on Rome to try to contain the damage.
The Italian government has sought to spend more money to spur the economy. But European leaders, led by Germany, have enforced rules limiting budget deficits. And Italian banks have held tight to cash and are reluctant to lend, starving an already anemic economy of capital.
All of which leaves Italy and Europe, and to some extent the global economy, with a formidable conundrum. Europe may never regain economic vigor so long as Italy’s banks are a slow-motion emergency. But Italy’s banks cannot get healthy without growth. And Italy’s economy can’t grow without healthy banks.
Dollar Extends Record Streak of Gains Versus Euro on Trump Plans
The dollar extended its record winning streak against the euro amid speculation Donald Trump’s reflationary economic policies will trigger faster monetary tightening.
The greenback has strengthened for 10 straight days against the euro, the longest rally since the shared currency’s debut in 1999. The dollar is also heading for the biggest two-week advance against the yen since that same year.
The U.S. currency’s appreciation over the past two weeks has come as Treasury yields have surged on bets the new administration will boost spending and spark an increase in inflation. Fed Chair Janet Yellen suggested Thursday the central bank remained on course to tighten policy, while Fed St. Louis President James Bullard said Friday that some of Trump’s potential policies may help restore lagging U.S. productivity.
“U.S. dollar momentum has been strong,” said Vassili Serebriakov, a foreign-exchange strategist at Credit Agricole CIB in New York. “The move has further to go. We could see some consolidation ahead of the Thanksgiving holidays, but I suspect markets will continue buying into any U.S. dollar pullbacks.”
The dollar advanced 0.5 percent to $1.0573 per euro as of 11:16 a.m. in New York, and reached the strongest level since December. The U.S. currency added 0.6 percent to 110.80 yen, on track for a two-week advance of more than 7 percent, the biggest since 1999.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, reached the highest since February. The gauge is up 1.9 percent this week after last week’s 2.8 percent rise. It’s gained 1.6 percent this year, after accumulating losses for most of 2016.
read more: Bloomberg
Euro, Dollar Flirt With Parity
A losing streak for the euro against the U.S. dollar is rekindling an old debate: Will the common currency reach parity with the dollar?
In the last two weeks, the euro has fallen 4% against the dollar, hitting $1.06, a level last seen 12 months ago.
The sharp shift in expectations for U.S. interest rates and economic growth since the American presidential election has refueled the euro’s fall against the greenback. If the Federal Reserve increases rates, expectations are the dollar would rise further by drawing money to the U.S. looking for higher returns.
The European Central Bank, meanwhile, is showing few signs of a major shift in a monetary policy that has pushed rates into negative territory and includes a huge bond-buying program.
The euro also has to contend with a gantlet of coming eurozone votes that could increase power for the sort of populist parties that, many investors believe, embrace policies that could stymie growth.
Following Donald Trump’s election, Citigroup said it had shifted its euro-dollar forecast “180 degrees.” The bank now predicts the euro will tumble to 98 U.S. cents in the next six to 12 months. Last week, others joined the bank in predicting parity. On Monday the euro rose 0.3% against the dollar to trade at $1.0624.
read more: Wall St Journal
Four City Contenders For London’s ‘Fintech Capital of Europe’ Crown
Before the fateful day of June 23, 2016, London was the undisputed fintech startup and financial capital of Europe.
Whether the vote to leave the EU will change that will depend on the post-Brexit landscape, but without access to the single market, and free movement of continental tech talent, London’s ability to retain its prestigious title is already being called into question.
Speculation is rife over London’s most likely successor. The last couple of years have seen fintech hubs emerging throughout the continent in cities with an abundance of indigenous tech talent, and increasingly, the investment that make them serious contenders to the top spot in the European fintech hub rankings:
read more: Forbes
Foreign Money Funds Seattle CRE Boom
International business is booming in Seattle.
Recent statistics from the Economic Development Council of Seattle & King County show that foreign investors have spent over $4 billion on King County commercial real estate since 2015, more than triple the amount spent earlier this decade.
What’s driving foreign investment in the region? According to The Seattle Times, usually foreign investors interested in real estate are laser-focused on housing. But big Seattle companies like Amazon, Microsoft, Boeing and Starbucks have drawn attention to commercial real estate in the area.
Prices in the region are also attractive to international developers, brokers and commercial real estate buyers. Overall, commercial real estate in the Seattle area is much cheaper than it is in places like New York, San Francisco, Los Angeles and Vancouver, BC, which have traditionally been more popular with foreign companies.
The largest recent commercial real estate purchase in Seattle was made last year, when Hong Kong-based Gow Capital Partners bought Columbia Center, the city’s tallest building, for $711 million. Smaller recent sales include Mirae Asset Global Investment’s $247-million purchase of an Amazon office building in Seattle’s South Lake Union neighborhood, as well as the sale of Safeco Plaza in downtown Seattle. It was picked up for $387 million by a partnership between Germany’s GLL Real Estate and South Korea’s Vestas Investment Management.
No Laptop, No Phone, No Desk: UBS Reinvents the Work Space
A desk is like a home away from home for many in the working world.
Family photos, trinkets from a vacation, an extra pair of shoes or spare chopsticks are just some of the things routinely left lying around in what has become personal space.
But that comes at a price for companies, particularly in cities like London or New York, where the cost of real estate is at a premium, and at a time when workers are more mobile than ever.
Many of its employees at 5 Broadgate in the City of London will no longer be tied to the same desk every day with a telephone and desktop computer. Instead, the company has deployed so-called thin desks throughout the building.
Phone handsets were replaced by personal headsets, and employees can log onto their virtual desktops on computers at any desk in the building or at home. There are no laptops to lug around, and their phone numbers follow them from desk to desk or to their mobile devices.
“For me, it’s opening up and allowing people to work in different ways on whatever project, whatever activity they’re working on,” said Andrew Owen, managing director for UBS group corporate services in London. “Being chained to a desk in a singular environment is restrictive.”
Employees have a small amount of filing space and a locker where they can keep any personal items they might use during the day. (Larger caches of documents that are held on paper for the longer term can be retrieved from an off-site location within two hours.)
The elimination of fixed desks is not a new concept — it has proved particularly popular among technology companies and start-ups — but only in recent years has technology made it more viable for larger companies.
read more: CNBC
Millennials Rank Travel Above Buying a Home
In a study looking at the priorities of millennials, travel came out as a higher priority than buying a home or car, or even paying off debt. Travel also gave savings and retirement funds a run for millennials’ money.
The study, which surveyed about 1,000 people aged 18 to 35 in the U.S., U.K. and China, asked millennials about their priorities for the next five years. Airbnb and market research institute Gfk conducted the study to determine the importance millennials place on travel, and what drives their travel decisions most.
For U.S. respondents, savings and investment funds ranked highest, followed by travel and purchasing a car, which tied in priority. Traveling was also a higher priority than buying a home for U.S. respondents.
In the U.K., traveling and savings were almost equal, and both were more highly prioritized than buying a home.
In China, travel was the highest priority by a wide margin. Purchasing a car was next, followed by purchasing a home.
Travel was growing in priority across the board: Fifty-five percent of respondents in the U.K., 56 percent in the U.S., and 83 percent in China are spending more on travel this year than last year.
read more: FoodandWine
Jackie O’s Childhood Home Back on the Market
One-percenters looking to live like American royalty now have a chance to buy into Manhattan’s famed 740 Park Ave. co-op — and for a notable discount, to boot.The childhood home of former first lady Jacqueline Kennedy Onassis — a sprawling four-bedroom pad — returned to market this week for a cool $29.5 million, Curbed reported. That’s far from a song, but when compared to the home’s original — and sky-high — asking price of $44 million in 2014, a billionaire might call it a deal.
The duplex’s current owner, hedge-funder David Ganek, purchased this spread for $19.1 million in 2005, according to city records. After listing the residence in 2014 for that stratospheric $44 million sum, the home languished on the market until early this month, and even saw a price chop to $32.5 million, StreetEasy shows.
read more: NY Post
This Robot Can Shovel Snow from Your Driveway
Homeowners who dread clearing their driveways and sidewalks may have a helping hand, thanks to a New York startup and a robot that can shovel snow.
The robot, called the Kobi, comes with a starting price of $3,999. That’s a lot more than a snowblower — but it promises to also mow the lawn and pick up leaves. Just another example of a robot killing a few more jobs?
The Kobi uses GPS to link to the weather forecast, so it knows in advance if snow is forecast. It starts removing snow while it is still falling, then patiently recharges and gets back to work.
It comes with a docking station that offers fully autonomous recharging and can travel at a speed of up to 2 miles an hour. It can mow a lawn of up to 7 acres, while its leaf module can handle up to 3 acres and the snow module can handle up to 0.37 acres.
read more: MarketWatch
Happy Thanksgiving, we are off Friday. Our Next NewsWatch will be on Monday 11/28.
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