Posts tagged with crisis

(I) Construmat 2011: Internationalization process to China and possibly to Brazil

20 September, 2012 No Comments

(Video with English Subtitles)

Construmat 2011, the International Exhibition of construction that was held in Barcelona in 2011, renewed its biennial meeting announcing its progress despite the crisis. The Organization signed an agreement for this show to take place in China in 2012, aiming to help the brick industry penetrate in the Asian market. At the same time they were also awaiting to close a deal with Brazil, to host the show there, with the consequent impact on the Latin American market.

In Spain, it is the most important exhibition of the construction industry, and in Europe one of the largest along with Batimat. The following take place during the show:

* Is a place where builders, developers, architects, and manufacturers of materials converge.

* New processes and developments of innovative materials arise.

* It is a meeting point to analyze, discuss and present the major technology releases, market news, and new industry trends.

Due to the current crisis, demand for construction material has fallen in Europe. Companies that want to grow must go outside (which is also a way to dispose of the surplus in construction machinery that Spain currently holds). Construmat helps especially SME’s, which are the ones that present more difficulties to send missions to China, by participating on their expansion process and advising them about the peculiarities of  other markets (i.e the large Chinese market). Construction is growing dramatically in China due to the internal migration of people from rural areas to the big cities (which I explained in previous posts).

The internationalization of companies that manufacture building materials that were already positioned in other foreign markets, has allowed them to increase their sales (i.e. the group Cosentino, producer of Silestone). According to an interview published by El País, May 15, 2011, Cosentino was well positioned in the U.S. market and stated that 70% of its revenues were from outside of Spain, and hoped to reach 82% in 2013. Its main projects during 2011 were to enter in Asia and Latin America, and to have a total of 30 people in their ​​R&D department, currently focusing its research on new technologies and designs, such as ECO (its organic product, winner of a European award…) “What gives us strength is to do different things“.

2011 Menu

12 September, 2011 No Comments

It is quite difficult to give advise but it is even harder to predict.

The fact that 2010 was characterized by the wisdom with which real estate investors operated, lead us to think that 2011 could go the same way, especially in the residential sector (heavily influenced by the lack of financing for properties that were not within the bank´s portfolio).

The engine for non-residential real estate transactions during 2011 could be malls and store space, surpassing demand for office space (mainly due to the decrease in rental income and to the turnover of some portfolio´s investors).

Due to the lack of financing many companies cannot continue to develop their regular activity, and their investment side has had to put their Real Estate assets for sale, in many cases through the common “Sale & Leaseback” method, at very attractive prices for external investors.

It is interesting to see that a crisis can also be a source of opportunities. It is especially at the end of it when one can make the best investments…. but the big question is: are we close to the end? To answer this you must pay attention to the moves investors are making.

If we take a look to the moves Amancio Ortega (Zara) is doing, we see that he is closing its SICAVs (variable income Investment Companies) to spend his money on real estate. With this money, the Ortega Family Office “Pontegadea” negotiates the purchase of buildings of financial institutions such as BBVA. This bank previously sold them to real estate fund REEF (owned by Deutsche Bank), in which BBVA went from owner to tenant. Later on, REEF started to sell these assets and, Ortega as well as many other investors, have been taking advantage of the liquidity needs financial institutions are facing, by acquiring quality properties at a discount. Besides the investments Pontegadea was doing in Spain, they are also investing in international destinations such as the US, Mexico, Portugal, France, and Germany. Pontegadea  focuses on commercial and office buildings that have long-term rental contracts, and that are located in the city’s prime location, which is the sector that better withstand the crisis (Expansión, 12/21/10)

Other great fortunes (ie. Isak Andic, owner of fashion brand Mango, who recently bought a building in Paseo de Gracia, 36) are investing in real estate. This type of investors are very well advised, and are able to see great business opportunities in the midst of this profound crisis and a broken housing market.

Read the following phrases that Albert Einstein proposed in order to overcome a crisis,

(II) L’immobilier a París a le vent en poupe

3 August, 2011 No Comments

The situation in Paris and part of France, could be a sign of a slight recovery in the housing sector. Even though buying a property could be a safe haven for one’s money, one must wait and see how 2011 reacts, as one shall not forget that it is a fragile market unbalanced by the crisis and an economic situation filled with uncertainty. (All of this combined with a possible increase in interest rates and a partial reduction in government aid …… should warn investors to act prudently.

(Magazine Le 19/08/10) This strong awakening of the real estate market after a latent period (in 2008), has resulted in a significant increase in prices, especially in Paris, which are being compared to the levels before the crisis, and makes people regret not having bought a property a year earlier, instead of having waited for prices to decrease even further.

But the big question now is: Faut-il acheter maintenant? (Should we buy now?)

This outrageous increase in value of real estate assets during 2010 is given only in large cities and some suburbs; whereas in small cities and rural areas of the country, the increase existed in a much smaller scale.
For investors who are buying fast and under pressure due to the small number of properties for sale and the speed in which are sold, I believe that rush always carries a risk and most of the times is not worth it. At first sight it is appealing to buy fast for the reasons that I previously stated, but to me it is not enough argument because buying a property takes time and market research, in addition to be disciplined to avoid buying overpriced and mediocre assets.
I agree that some tax incentives and low interest rates are appealing, BUT in a market with little supply there is a higher risk of getting anything at any price.  In this case, whatever gain obtained on one side with tax deductions can be exponentially lost on the other side due to the purchase of an asset that when is time to sell, does not generate capital gains because at the time of purchase was an overpriced asset.

“Pour les Notaires de France, cette hausse s’explique a la fois par la permanence des taux historiquement trés bas, mais aussi pour le valeur refuge donnée aux investissements immobiliers lors de periodes de crise”. Certain questions arise such as: what will happen to prices if rates go up?……. Can we anticipate another housing bubble? are wages capable of keeping up with current prices?