Corporates looking to real estate assets to unlock capital and build business resilience, says JLL
Demand by corporates to release capital from their real estate assets is increasing, according to JLL’s report Raising Capital from Corporate Real Estate.
The heightened uncertainty caused by the Covid-19 pandemic is leading corporate owners and occupiers to actively seek new sources of liquidity and greater flexibility across their real estate portfolios, as investor appetite for stable income-generating real estate grows.
The report reveals that interest in sale and leaseback opportunities is set to continue growing this year following a record high in 2019, where disposals of corporate real estate raised EUR23.1 billion, across more than 460 transactions in Europe, Middle East and Africa (EMEA) alone. Marking a significant 33 per cent increase YoY, 2019 was also the fifth consecutive year
in which the total value of corporate disposals exceeded EUR15 billion. JLL found that offices, retail, and industrial & logistics continued to be the most active real estate sectors for corporate disposals in 2019, accounting for 76 per cent of the total value of corporate disposals in EMEA, with assets increasingly being sold as portfolios rather than individually.
“At a time when debt markets and other sources of capital are significantly constrained, corporate owners and occupiers are re-evaluating their business models and are increasingly comfortable using real estate assets as strategic tools to release cash and maximise working capital. We’ve started to see more corporates prepare assets for sale, and we should expect this activity to be more visible in the second half of the year as markets return to normality,” says Nick Compton, Head of Corporate Capital Markets, EMEA, JLL.
“At the same time, volatility and uncertainty are impacting real estate investment leaving many investors searching for opportunities to cautiously deploy available dry powder. The growing range of new – and in some cases unique – prospects for long income and net-lease investors to consider across the region will allow many to deploy cash reserves and significantly expand assets under management by tapping into an increasing number of high-quality opportunities in different markets, sectors and locations,” adds Compton.
Private equity controlled mid-cap corporate real estate disposals, which were key in 2019 will likely continue to be a feature in the sector this year. There has also been rising investor interest for specialised corporate properties with characteristics that are critical to operations, such as research buildings and complex manufacturing facilities.
Mark Caskey, CEO Corporate Solutions, EMEA, JLL, says: “Businesses looking to build greater flexibility and resilience across their real estate portfolios are, and we believe will be, increasingly looking at different routes to generate liquidity from their property assets. By releasing capital, owners can deploy cash opportunistically whilst repositioning
their occupational real estate assets.”
Matthew Richards, CEO Capital Markets, EMEA, JLL, adds: “Third party capital can also provide an alternative to those who have self-funded construction commitments, allowing corporates to build resilience across their core businesses and focus on key priorities that can best equip them to fuel growth in the future.”