Real Estate Owners & Developers
With economic uncertainty, stock market volatility, corporate scandals, and geopolitical threats, real estate has become the “sweet spot” for investors. Real estate professionals participate in initial public offerings, complex tax structures, financing alternatives, builder joint venture arrangements, limited partnership structuring, interest rate hedging alternatives, business acquisition and divestitures, property valuations, and local tax issues.
Construction & Homebuilders
In terms of gross sales, residential development and construction is the largest single sector of the real estate industry. Because of the typical builder’s organizational structure and financial leverage, the financial position and operating results of the homebuilder can change drastically in a relatively short time. Specialists serving the homebuilding industry must consider the significance of national economic changes, including demographics, financing, interest rates, consumer confidence, and housing demand. They also have experience in all facets of low income, affordable, luxury communities, and multifamily housing, and with issues covering changing tax law, the environment, and regulatory climate.
Real Estate Funds
Over the last 10 years the real estate industry in Europe has become subject to capital markets discipline which in effect drive greater efficiency. Property prices have increased over time due to the large amount of capital looking to be invested and thus the market now has more of a financial base. As a result, there is a surplus of capital looking for quality products, which means that investors are having to look elsewhere for assets.
Real estate as an investment asset is increasingly attractive given the volatility of the equities market and relatively low yielding bond market. The industry is also attracting significant allocations from financial institutions and investment funds.
Key trends in the market include:
- A surplus of capital
- Increased allocations to real estate by asset managers
- Increased governance
- Accounting transparency requirements on corporate companies
- Increased pressure on public sector organisations in order to create value out of their existing asset base
There has also been a major shift towards specialisation demonstrated by institutions transferring assets to specialist indirect investment vehicles, and this is expected to continue. As a result of these trends, we expect to see a further migration of assets from the corporate and public sectors to specialist owners and greater focus on existing owners and occupiers maximising value from real estate.
After Human Resources (HR), real estate is among the most significant operating costs for most companies. In many cases, Corporate Real Estate (CRE) represents a third or more of their operating costs. Similar to HR, CRE is a discrete function within most corporations, increasingly viewed as salient and strategic to sustainable growth. When planned and aligned with HR and IT operations, as part of the corporation’s infrastructure, real estate can add significant competitive advantage to a company.
Deloitte can assist with facilities management strategies as well as systems selection and implementation. In slower economic times, many companies find themselves over-leveraged and cash poor. They are eager to strengthen their finances and move real estate assets off their balance sheets, lower costs, reduce debt, and free up capital and resources. Deloitte can help clients “right size” their assets and activities, whether through:
- the partial or complete outsourcing of their non-core functions such as real estate;
- the recapitalization of existing portfolios; or
- the disposition of excess properties.
They offer business process outsourcing, portfolio realignment, and occupancy cost management solutions.
Hospitality & Leisure
The Deloitte Hospitality Group has unrivalled knowledge of both the industry and the business imperatives that face individual clients. As a leading provider of professional services to the international hospitality industry we act for owners, operators, developers and investors. We work with most of the world’s leading companies in each of these categories as well as fast developing branded hotel groups domestically and internationally.
Destination Leisure largely comprises places of entertainment, theatres, cinemas and visitor attractions. It is a very diverse sector but shares common issues and opportunities. The sector is closely tied to real estate and, with the current strength of the property funding market, sales and leasebacks are becoming more attractive. Another example of a common challenge is the availability and cost of entertainment products, e.g. shorter time periods of DVD releases affect cinema admissions and there is a challenge for theme parks to make a return on the increasingly large investment required to add a ride with sufficient impact to improve spendings or visitor numbers. The attraction of this sector from an investment perspective is that it is a very consistent performer, indeed much of the product has been around in one form another for hundreds of year. However, there is a significant increase in the availability of all forms of entertainment, particularly within the home, and successful players need to adapt and evolve.
The travel sector has undergone tremendous change in recent years driven by the emergence and widespread use of the Internet, demographic and social changes, new business models such as low cost airlines and all against a background of worldwide turbulence from terrorism, warfare and natural disasters. Concerns over the environmental damage caused by airlines and travellers and ensuring the sustainability of tourism are prominent issues in industry discussions. Deloitte provides services to a wide range of clients in this sector including tour operators, travel agents (both online and high street retail) and the global distribution systems, or GDS, which are distributors of travel products to agents and tour operators.
The hotels sector has experienced growth and continuing growth is predicted for the future. With the increased focus on cost, shared services is high on the CXO’s radar. We have pioneered the blueprint for the industry for a shared service platform and remain uniquely placed to assist the industry in transitioning to such a platform. The development of the Internet as a distribution channel has challenged the hoteliers to respond and ensure that brand ownership remains a key asset of the operator and investor. We are working with some of the largest hotel operators in the world to develop strategies to manage and develop their intellectual property.