Colliers’ team (from left): Paddy Allen, head of operational capital markets, UK; Chris Pilgrim, managing director of global capital markets for Asia Pacific; Luke Dawson, head of global capital markets; and Sam Harvey-Jones, COO of Asia Pacific (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - Higher interest rates and rising debt costs may have choked off some of the big-ticket commercial office deals in the latter part of 2022. But Colliers has chosen to play the long game. The Nasdaq and Toronto Stock Exchange-listed real estate services and investment management firm has gone ahead with a series of senior-level executive appointments and acquisitions in the capital markets space.
“Even with these headwinds, we’re still investing heavily in the growth of our capital markets business,” says Chris Pilgrim, who assumed the role of Colliers managing director of global capital markets for Asia Pacific on Jan 1. Pilgrim is moving to Singapore from London, where he has been based since joining Colliers in June 2021 as director of global capital markets.
Bastiaan van Beijsterveldt, who joined Colliers in 2019, assumed the mantle of managing director of Singapore, according to a Jan 10 announcement. He succeeds Tang Wei Leng, who is now Colliers’ managing director and head of capital markets and investment for Singapore.
Bastiaan van Beijsterveldt, who joined Colliers in 2019, assumed the mantle of managing director of Singapore (Photo: Colliers)
Colliers has 1,500 capital markets professionals around the world. “Capital markets is the company’s number one focus globally — in Europe, the US and the Asia Pacific region,” says Sam Harvey-Jones, Colliers COO of Asia Pacific since November 2021. “That’s where our growth has come from over the last 12 months, both from a headcount and investment perspective.”
On Jan 10, Colliers also announced the appointment of Luke Dawson as the new head of global capital markets. Dawson will retain his existing role as capital markets leader for EMEA (Europe, Middle East and Africa).
“From a European perspective, we plan to hire 250 people over the next three years just for capital markets,” says Dawson. “That would essentially double the size of our capital markets business. We’re hiring based on geography and specialty because the market is becoming more diverse, and we’re seeing new business segments developing.”
Last December, Colliers acquired Pangea Property Partners in Norway and Sweden. It will add 550 real estate professionals, including more than 80 capital markets experts to Colliers’ stable. It will also make Colliers a leader in the Nordic region.
In October, Colliers acquired a 75% stake in Versus Capital, a US alternative real asset management firm with assets under management (AUM) of over US$6 billion ($7.9 billion). The acquisition of Versus boosted Colliers’ global private wealth business, raising total AUM to US$87 billion. This followed the acquisition of a 65% stake in Rockwood Capital in May. The New York-based real estate investment management firm has US$12 billion in AUM.
In August, Colliers acquired a controlling interest in Peakurban, an engineering company in Australia. In May, Colliers took a majority interest in Paragon Building Consultancy Holdings, one of the UK’s largest independent building and project consultancies. April marked the completion of two acquisitions in Italy: Colliers Italy, previously an affiliate and a full-service commercial real estate firm; and Antirion SGR SpA, one of the largest real estate investment management firms in Italy, which has been rebranded Colliers Global Investors Italy.
Reflects deals transacted from 200 million euros
Colliers’ latest financial results showed revenues of US$1.11 billion in 3Q2022, up 8%, while earnings were at US$145 million, 17% higher y-o-y. For the nine months ended Sept 30, 2022, revenues were US$3.24 billion, up 18%, with earnings of US$427.8 million, up 21% y-o-y.
“Outsourcing and advisory, investment management and leasing [were] all up strongly, more than offsetting the softness in capital markets which is being impacted by higher interest rates, availability of capital and other geopolitical uncertainties,” global chairman and CEO Jay Hennick commented in the 3Q2022 results release on Nov 1 last year.
Colliers’ diversification across service lines, geography and client types also means that the firm “has more balance and resilience than ever”, according to Hennick.
Colliers’ clients are also pursuing a diversification strategy. “Since 2021, the strategy for investors from Asia Pacific going into London and other gateway cities in Europe, the US and Australia has been of diversification,” says Pilgrim.
“We saw a lot more investments going into logistics, which has been a strong sector over the last five years but had accelerated during Covid,” Pilgrim continues. “Then, as we came out of Covid, we saw a strong recovery in alternative markets, such as student housing.”
In the student housing segment, the biggest deal was the GBP3.3 billion ($5.4 billion) sale of the 23,000-bed Student Roost Portfolio in May last year. The buyer was a joint venture between Singapore sovereign wealth fund GOC Real Estate and US real estate group Greystar Real Estate Partners. The seller was a private fund of Canadian asset management giant Brookfield.
Towards the end of 2022, two other Singapore groups made purchases in the student housing market. Singapore-listed lodging platform Far East Orchard acquired a 180-bed, freehold student accommodation property in Southampton, Southwest London, for GBP13.9 million on Dec 6. The purchase price was about 2.1% below the property’s market value of GBP14.2 million, based on a valuation report by JLL as of Nov 25.
With the acquisition, Far East Orchard will have around 4,400 beds in its student accommodation portfolio in the UK. The group aims to have 5,000 beds by 2025.
Singapore-listed property giant City Developments (CDL) acquired five purpose-built student accommodations (PBSA) for GBP215 million, made via two separate transactions, according to a Dec 15 announcement.
The PBSA portfolio has 1,863 beds with an average age of fewer than three years. The assets are located in Birmingham, Canterbury, Coventry, Leeds and Southampton. They have an average committed occupancy rate of over 98%.
This brings the tally of CDL’s UK living sector portfolio to nine projects comprising over 2,300 PBSA beds and a pipeline of over 1,300 private rented sector (PRS) units.
The attraction of PRS and student housing is the resilience of these assets, says Paddy Allen, head of operational capital markets, Colliers UK. “Student housing is utility-driven and negatively correlated to wider macroeconomic movements,” he adds. “It’s actually the converse in the world of higher education: We’ve seen the increase in participation in higher education across periods of recession. So it’s quite resilient.”
Over the past five years, there has been a real push into sectors such as student housing and multi-family residential property in the UK and Europe, which are still relatively underbuilt, notes Allen. “There is still a lot of development potential across these assets, especially residential build-to-rent and multi-family investments,” he says.
Outside the UK, Asian investors have been equally active across Europe, notes Dawson. Besides student housing, they have been acquiring commercial and logistics assets too. “A lot of these players view logistics as a pan-European asset class,” he adds.
Market volatility has led investors to focus on fundamentals and defensive strategies in 2023. Investors’ top three sector preferences for 2023 are offices (60%), industrial and logistics (60%), and multi-family/built-to-rent (48%), according to Colliers in its Dec 7 outlook report.
While investors generally prefer core assets in established, larger cities, sectors closely connected to changing demographic and economic realities, such as multi-family and senior housing, are driving activity in smaller, growing cities. Interest has picked up in first-mile logistics as investors recognise opportunities for nearshoring or reshoring of manufacturing facilities to mitigate supply chain disruption and increase inventory, with a focus on container terminals having doubled over the last 12 months in EMEA and Asia Pacific, according to Colliers.
The weaker pound sterling (GBP) against the Singapore dollar (SGD) in recent months presents “good value” from a currency perspective, notes Pilgrim. At the height of the UK’s political uncertainty, cost-of-living crisis and rising inflation, the GBP sank to a low of 1.55 against the SGD on Sept 23, 2022. The GBP is now hovering at 1.62 (Feb 1) against the SGD.
Even the euro, at about 1.61 against the SGD two years ago, has weakened to 1.43 as of Feb 1. “The pound and the euro have both depreciated fairly quickly over the past few months,” says Dawson. “For many buyers, the currency is another reason to potentially deploy capital into both those markets even though it won’t be the primary reason.”
Dawson sees private family offices becoming more dominant players in the coming months. “Whenever you have a period where financing becomes difficult, oftentimes, the private family offices become more active,” he says. “They’re able to buy with all equity and view this as an opportunity to enter into assets that could be relatively cheap versus where they were six months ago. And their holding periods are much longer than your typical investor.”
Read more: Singapore investment deals pick up in early 2023 but bite-sized deals prevail