What to do with a continental European property business these days? That’s the question Savills’ board members will be asking themselves after this week’s interim management statement from the firm. In truth, it won’t just be Savills; its update will give pause for thought to many in the industry.
Savills’ statement confirmed the expected: prime London and Asia Pacific businesses have continued to perform well. The US business didn’t do badly either: an improving real estate investment market slowed in the summer, but remains broadly in line with expectations.
There were positive performance pockets in continental Europe too, with improved transaction activity year-on-year in Germany and the Nordic region.
However, it is the rest of the continent that is causing anxiety or, as Savills puts it in measured tones: “Macro economic issues have curtailed activity in many countries. To date, our strength in the prime markets of London and Asia has sheltered the group from the reduction in activity in mainstream markets and compensated for underperformance in continental Europe.”
So how bad is it? In places, as bad as it gets. Of property management, the statement says: “In continental Europe, we continue to mitigate our exposure to loss-making countries.”
The firm doesn’t talk of withdrawal, though I would be surprised if some senior voices are not advocating a complete retreat from loss-making territories and service lines. For now, the firm is “taking steps to further reduce our presence and cost base in a number of non-core markets”.
In the good times it is easier to take a medium- or long-term view. But how patient can Savills and others afford to be about recovery in many continental European markets?
Cut and run or stay and hope? It’s a tough call.
Just how tough that call is was in evidence this week at MAPIC. Marks & Spencer’s director of international, Jan Heere, had just finished his upbeat speech about the retailer’s international expansion and a planned return to Paris when he was served up a tougher than usual question from the floor: Was M&S expecting to be warmly greeted on its return to Paris given that it withdrew from the market completely just a decade ago, making 1,700 people redundant in the process?
Credit to Heere; he dealt with it well, acknowledging that it could have been handled better and saying M&S was hiring staff from the retailer whose premises it was taking on.
But the question highlighted just how long memories can run and how unforgiving people can be about perceived slights. Withdrawing from markets is not a decision for the faint-hearted.
The Estates Gazette/UK Regeneration campaign Building a Better Britain gathered momentum this week.
The (metaphorical) campaign bus hit Manchester twice: for our first Question Time event (more on that next week) and then for a discussion on restoring the reputation of UK cities after the summer’s riots. The latter was streamed live on EGi, with Manchester city council leader Sir Howard Bernstein and I among the panellists, and the BBC’s Gordon Burns in the chair.
On Tuesday it was back to London for the first meeting of the Regeneration Commission. Berkeley Group’s Tony Pidgley, Jones Lang LaSalle’s Andrew Gould and BarCap’s Brendan Jarvis were among those who sought to identify ways of keeping the regeneration fire burning at a time of an empty public purse. Thanks to them and all the other panellists for their hard work, commitment and inspired ideas.
Again, more on that next week. Nevertheless, the sense of progress, even at this early stage, was palpable.
