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Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
Gb540.unit6.final project
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Gb540.unit6.final project

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  • 1. Navigating the volatile landscape of commercial real estate<br />CB Richard Ellis (CBRE)<br />By: Try L. Muller<br />GB540: Economics for Global Decision Makers<br />
  • 2. The following topics will be covered:<br />Global performance past and present: 3 – 7<br />Brief strategic audit: 8-9<br />Emerging Opportunities: 10-18<br />18-24 month forecast: 19-21<br />Recommendations: 22<br />
  • 3. PAST PERFORMANCE 2006 - 2008 <br />Total global revenue (EMEA, and Asia Pacific) began to break trend in 2008 by flattening out instead of increasing from Q1 – Q4.<br />Significant peak<br />Global Credit crunch <br />3<br />
  • 4. PAST PERFORMANCE 2006 - 2008 <br />Global Investment revenue showed stability after its peak in 2006 but dropped and flattened out dramatically in 2008. <br />Significant peak<br />4<br />
  • 5. CURRENT PERFORMANCE 2009 <br />Global investment revenue (EMEA, and Asia Pacific) in Q4 2009 almost peaked to its 2nd highest total in 16 quarters. <br />5<br />
  • 6. CURRENT PERFORMANCE 2009<br />Global operating income (EMEA and Asia Pacific) in 2009 dropped sharply– marked by its lowest operating income in 4 years as shown in Q1. A surge in Q4 of 2009 has great implications for CBRE’s operations.<br />Indicative of a much more favorable global economy with good market turnover<br />Lowest operating income in 16 quarters: illiquid credit markets and global unemployment<br />6<br />
  • 7. Total global investment revenue (EMEA, and Asia Pacific) in 2009 performed poorly for the entire year. Only in Q1 was it near the 4 yr quarterly average. <br />7<br />CURRENT PERFORMANCE 2009 <br />
  • 8. STRATEGIC AUDIT<br />8<br />
  • 9. CBRE STRATEGIC PERFORMANCE<br />9<br />
  • 10. EMERGING OPPORTUNITIES <br />10<br />
  • 11. POTENTIAL RETAIL EXPANSION IN EUROPE<br />11<br />
  • 12. 73% of retailers surveyed said they wanted to open at least 10 stores Europe by 2010 (CBRE Ireland News Detail, 2009).<br />CBRE can capitalize on this through a sensible increase in speculative property purchases (investment) for the potential influx of retailers looking to leverage the poor global economy.<br />Can potentially see a significant increase in returns on global investment and help revenues.<br />HOW WILL CBRE CAPITALIZE ON THIS?<br />12<br />
  • 13. PHARMACEUTICAL S&L ACTIVITY TO CUT COSTS<br />S&L<br />sale and leaseback- owner sells a property and enters into a lease for the property with the new owner— generating quick capital for the seller and long-term lease capital for the new owner<br />Pharmaceutical companies need to cut costs through M&A and S&L (CBRE Global Viewpoint, 2009)<br />Manufacture drugs in lower cost economies (Eastern Europe, China, India) while looking to S&L facilities for quick capital (CBRE Global Viewpoint, 2009)<br />13<br />
  • 14. HOW WILL CBRE CAPITALIZE ON THIS?<br />Develop relationships with pharmaceutical companies in global regions CBRE operates<br />Research the companies that are on the verge of following this future trend for the industry<br />Secure pre-determined long-term lease back agreements with pharmaceutical companies before they are ready to pursue opportunities<br />Take advantage of long-term capital gains and liquidity<br />14<br />
  • 15. 15<br />ACTIVE S&L MARKET IN UK, GERMANY, SPAIN, ITALY<br />
  • 16. Divert resources to recruiting companies for S&L in these places<br />R&D of potential transactions should increase significantly<br />Use secured S&L transactions as a long-term sustainability strategy by overlapping lease back terms<br />Focus on generating revenue through lease backs from each country– multiple channels of capital resources<br />16<br />HOW WILL CBRE CAPITALIZE ON THIS?<br />
  • 17. Markets improved in the latter half of 2009 mainly due to the monetary and fiscal stimulus used by China to withstand the recession and stimulate liquidity (Chan, 2010)<br />Pricing has modestly, but surely improved across the region<br />Asia has experienced both an increase in transaction volume and higher property prices (Chan, 2010)<br />17<br />RESILIENCY OF ASIA PACIFIC MARKETS<br />
  • 18. Divert resources to securing business transactions in Asia in the near-term <br />Discover opportunities for quick investment turnover in China’s liquid economy<br />Initiate lease agreements on vacant properties while markets are still liquid enough to sustain expansion and consumption<br />18<br />HOW WILL CBRE CAPITALIZE ON THIS?<br />
  • 19. Positive contributing factors to consider in the forecast<br />Office, industrial, and retail vacancy rates continue to rise but at a slower pace globally (Kummerfeldt, 2010)<br />Retailers have announced expansion into emerging EMEA markets (Kummerfeldt, 2010)<br />EMEA showed some stronger sales in Q4 of 2009 (Kummerfeldt, 2010)<br />Pricing has modestly but surely improved across Asia (Kummerfeldt, 2010)<br />China’s vacancy rates appear to have bottomed out<br />Demand for office space has increased by 28% (Flannery, 2010)<br />19<br />18-24 MONTH FORECAST<br />
  • 20. Negative contributing factors to consider in the forecast<br />Labor markets dependent on stimulus from central banks<br />What happens when China lessens stimulus? <br />Significant lag time between the economy and office occupier markets<br />Asia’s rental absorption expected to decrease by double digits (Flannery, 2010)<br />Demand for space is down in most EMEA markets (Flannery, 2010)<br />Emerging markets susceptible to market slowdown<br />European rental growth is still declining— may not have bottomed out yet (Flannery, 2010)<br />20<br />18-24 MONTH FORECAST<br />
  • 21. 18-24 MONTH FORECAST IN TOTAL GLOBAL REVENUE<br />Starting at the end of Q4 of 2010, the business cycle should be visibly heading towards expansion— free of heavy stimulus— and a reasonably liquid credit market. The gradual increase in total global revenue is consistent with the business cycle rate and the idea that consumption will rise at a slow pace.<br />21<br />
  • 22. Re-strategize ways to leverage the slow global economy with an efficient allocation of capital resources to emerging markets.<br />Devote significant resources to S&L opportunities in Europe and secure a pipeline of long-term lease backs.<br />Prepare mature investments so that they are prime for the retail explosion projected to occur in EMEA.<br />Take advantage of India’s relatively virgin retail markets— continue to increase presence. <br />Improve investment turnover in Asia— specifically China— while the market is government stimulated and before the effects of fading government stimulus set in. <br />22<br />RECOMMENDATIONS<br />

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