The head of transactions for CBRE Global Investors has cautioned against buying secondary and tertiary assets despite the pressure to invest cash in the current market.
“I certainly would not be buying in secondary locations,” said John Mulqueen, head of transactions EMEA, CBRE Global Investors.
“The mistake that was made by a lot of investors last time around was at this point in the cycle moving to secondary or tertiary locations and just chasing yield… I think that’s exactly the kind of thing not to be doing this time around.”
Mulqueen said there were already signs of the market turning, with falling occupier demand generally being masked by serviced office occupiers taking some of the slack.
“We have also seen in some markets that the development pipeline has begun.. and typically they begin just at the wrong time. There is the risk those developments come on stream just at the wrong moment, that always happens and its happening again.”
Despite this, Mulqueen thinks UK real estate remains relatively attractive compared to Europe.
“It’s an interesting time in the UK, because yields have not exactly moved out, but yields in continental Europe have moved in, so on a relative basis it is beginning to look more attractive.
“If you couple that with the impact of sterling’s reduction, I think you can see how some overseas investors see now as a good time to play. I think I would always in any point of the cycle prefer to be in those markets where you have long-term sustainable appetite.
“You can buy very high quality buildings in London, Manchester and Birmingham which on a European level look quite attractive.”
Mulqueen said CBRE GI would be looking for value add opportunities.
“Our focus is on staying in the very core areas. We are happy to take leasing risk, but I think we want to do that in an area where we can be sure if you offer the right product there will be an occupier.”
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