Savills Investment Management (“Savills IM”), the international real estate investment manager, transacted EUR 4.2 billion in 2018, with EUR 1.1 billion of disposals and EUR 3.1 billion of acquisitions. The firm now manages a company record of EUR 18.3 billion assets.
There were 80 transactions across 12 countries in 2018, with highlights including the acquisition of an office block at 125 Shaftsbury Avenue in central London for c. EUR 300 million; a pair of Polish transactions on behalf of a strategic partnership client for a combined EUR 500+ million; and the recent acquisition of two retail assets in France.
The firm also achieved several fund and mandate milestones in 2018, raising a record amount of capital of EUR 2.6 billion. This included deploying over EUR 1 billion on behalf of Korean strategic partnership clients. The firm also successfully completed the resolution of all assets from its Greater Tokyo Office Fund, producing positive outperformance which led to the launch of Japan II, a successor fund, with the backing of prior investors. Furthermore, the European Retail Fund exceeded EUR 500 million in assets under management, while the European Logistics Fund II surpassed its target raise and now manages assets of over EUR 450 million.
2018 saw EUR 3.6 billion transacted in Europe and EUR 580 million in Asia. European volumes were generated in part by a sharp rise in transaction activity in Spain and Portugal following the acquisition and integration in 2017 of the Spanish firm Zaphir Asset Management. At the time of acquisition, ZAM managed EUR 200 million of assets, a figure which has since risen to over EUR 800 million. This included the acquisition of a Spanish office portfolio for c. EUR 280 million earlier this year.
Savills IM also purchased a 25% stake in the real estate debt investment advisor DRC Capital in 2018. The firm raised c. EUR 780m for its UK Whole Loan Fund, beating its target raise of EUR 550m. DRC Capital has raised over EUR 3.0 billion across its managed fund vehicles.
Kiran Patel, Chief Investment Officer and acting Chief Executive Officer, Savills Investment Management, commented:
“European real estate markets performed strongly in 2018 and there is scope for the continent’s economy to maintain momentum in 2019. But the cycle is clearly at a mature stage and, given a current backdrop that includes political tensions across most European countries and the ongoing uncertainty in the UK around Brexit, investors might consider focus on protecting and enhancing income streams.
“There are still highly promising investment opportunities in Europe, in particular in the overlooked retail sector and the positive structural changing logistics sector. In our view, now is not the time to take major risks and investing for stable income in good quality properties in established locations, commensurate with the achievable returns would be a better risk adjusted profile to adopt.
“Asia is growing stronger than Europe, with better longer-term fundamentals in terms of population growth as well as faster-growing prosperity and urbanisation. This is leading to increasing occupier demand, while a growing middle class also drives demand for retail space and logistics via growing e-commerce. With Asian markets at all stages of evolution from emerging to established, many opportunities for core-plus/value-add real estate investing are arising.”