Zell looks forward to the end of the selfish developer as users force the industry to provide a better service
Occupiers will force the European real estate market to restructure into an oligopoly, according to Sam Zell, chairman and chief executive of Chicago-based Equity and Financial Management, adding that the industry should use the euro to hasten this restructuring.
Speaking at the Urban Land Institute conference in Paris, Zell said occupiers would drive the end of the “one-by-one” development process. “In Europe, users will deal with fewer and fewer landlords rather than have a unique one-on-one relationship in each country. The fact there are pan-European operators will force you to come together – users are going to be pressing you.”
This will also lead to more real estate operators rather than developers, he added.
“Europe is living in the past, where the focus was to protect from inflation and protect net asset value. The real estate market in Europe is very local in its nature but there is an opportunity to see that build and become a series of pan-European businesses which are efficient for investors and efficient for users, rather than efficient for developers.” He called the concept of net asset value “outdated” and said companies should be valued on the ability to “earn today and tomorrow”.
In an earlier discussion, Anthony Meyer, president, international for Prometheus Real Estate Investors LLC, Lazard Freres’ global real estate investment management affiliate, said there was also scope for smaller entrepreneurs as well as large pan-European companies.
“Some businesses need to be pan-European and not as local, for example Prologis which deals with the largest distributors in the world. Many businesses have no reason to be pan-European but still have to respond to the same capital markets,” he said. Prometheus targets such companies to capitalise and help them compete in this environment.
Richard Plummer, managing director of Pricoa, added that companies had “no real reason to be a pan-European property company unless it gives value to shareholders. The world can live without pan-European property companies.”
