Investment in ‘mission critical’ property pushes sale and leaseback volumes to record high of EUR 29.2 billion in EMEA in 2021

London, March 24 2022: Corporate real estate sales across EMEA leapt above EUR 29 billion for the first time on record last year – buoyed by frenetic levels of merger and acquisition activity and the increasing demand for industrial and logistic portfolios.

The latest issue of JLL’s annual - ‘Raising Capital from Corporate Real Estate’ report - reveals 2021 was another bumper year for occupier sales despite the pandemic with corporates generating EUR 29.2 billion across more than 670 disposals.

It marks the third consecutive year in which the total value of corporate disposals exceeded EUR 25 billion. And it came as the sale of industrial and logistics properties raised more than office disposals for the first time.

Monetising assets

JLL said growing volumes of capital were targeting long-term income from more specialised, ‘mission critical’ properties such as complex logistics portfolios, research and development facilities and manufacturing centres.

Corporate disposals of industrial and logistics properties raised a record EUR 11.1 billion in 2021 – well ahead of 2020’s previous record high of EUR 7.9 billion.

Notable transactions in 2021 included UK supermarket chain Asda’s EUR 2 billion sale of its distribution network to Blackstone. And in July, In July, real estate investor Hines acquired 11 logistics properties from French retail group Auchan for EUR 286 million.

Nick Compton, Head of Corporate Capital Markets EMEA commented: “Corporates continue to monetise a wide range of property assets, with another record year for sale and leasebacks in 2021 despite the headwinds from the pandemic and the economic uncertainty.

“The growing volumes of capital targeting specialised properties has opened up further routes to monetisation for owner occupiers, with supermarkets looking to raise income from their stores and supply chains, and firms in sectors like energy, life sciences and technology reviewing their asset portfolios.”

Matthew Richards, Capital Markets CEO, EMEA, JLL, added: “We expect another strong year for sale and leasebacks in 2022, with investors taking an increasingly sophisticated approach to transactions – looking beyond corporate credit profiles, focusing on defensive industry sectors and asset criticality as well as the wider context that may impact the value of individual properties.

“Expect to see more capital deployed in sectors such as complex manufacturing, energy repositioning, grocery and non-discretionary retail as they are likely to perform well in the face of rising inflation and higher interest rates.”

Meeting sustainability goals

JLL said that as the market moves into 2022, corporate owner occupiers and potential investors, are being increasingly driven by ESG factors and the adoption of post-Covid hybrid working patterns. The report remarks that corporates are looking to divest older offices that are often too big for their occupational needs, and too energy inefficient to support their sustainability goals.

Firms are also rethinking the types of space they need in light of the pandemic and reviewing where their offices should be located to support employee aspirations about flexible working patterns. An increasing number of corporates are also partnering with investors to forward fund new state of the art facilities to better meet their environmental ambitions.

Mark Caskey, Work Dynamics CEO EMEA, JLL, said: “Without doubt, 2022 is the year where corporates will have to act on ESG and net zero targets. An increased focus on sustainability and the adoption of hybrid working patterns is driving occupiers to divest older office buildings that are too energy inefficient or big for their needs.

“Corporates are working with investors to fund new state-or the art facilities that better meet their business and environmental ambitions – as well as the evolving needs and aspirations of their staff.”

Office sales totalled EUR 8.4 billion in 2021, with British motorsport firm McLaren selling its global headquarters for EUR 197 million to sale and leaseback specialist Global Net Lease. Dutch bank ABN Amro sold its headquarters for EUR 765 million to Victory Group.

The UK, Germany and France continued to be the most active markets for corporate disposals in 2021, accounting for 56 per cent of the total value of transactions, up from 52 per cent in 2020. The value of disposals in the UK alone jumped to EUR 6.6 billion, almost double the volume in France.

JLL’s report notes that despite the record year for sale and leaseback deals, some corporates are deciding to purchase the freehold of their leased properties, taking advantage of some temporary weakness in office pricing. American advertising group Omnicom bought their London headquarters for EUR 523 million (£440m) in November 2021.