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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 />
  • 10. EMERGING OPPORTUNITIES <br />10<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 />
  • 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 />