I’d always been baffled by the German phrase “Eule nach Athen tragen”.  Its English equivalent, “Carrying Coals to Newcastle” is self-explanatory, given the mining traditions of that hard-bitten northern English town.  But owls to Athens? 

 As it happens, the Greek capital did have a large owl population in its day, even meriting a reference by local author Aristophanes in his play “The Birds”.  However, the popular expression is more likely to refer to the owls printed on the coins in circulation in the wealthy Greek capital.  As such, they stood for a surfeit, an abundance – with the expression coming to mean that adding to the existing stock would be an exercise in futility.

As the EU and the European Central Bank rally round to bail out the modern Greek state, it’s clear that a lot has changed since those halcyon days of Hellenic prosperity.  Although the Greeks are in trouble now, they’re unlikely to be the last nation in Europe in need of assistance.  Others are likely to join them before this year is out.

So it was interesting to hear the views of Andreas Quint of Jones Lang LaSalle Deutschland at this year’s CIMMIT event in Frankfurt.  He told the assembled throng that real estate investment flows are again concentrating on the largest economies, with Germany therefore likely to profit disproportionately.

This new-found concentration on the strongest economies is a reaction to the crisis in the real estate markets, he said.  Smaller markets that rose quickly and subsequently collapsed, such as those in Eastern Europe, will take longer to recover than more developed markets.  More stable markets, like Germany, will benefit sooner from the huge war-chests accumulated over the past two years as prices cool to more reasonable levels. 

Quint is convinced that, after an almost total absence in 2009, we will see many more foreign investors returning to the German market this year, with adapted strategies.  His own company is engaged in many new negotiations right now with these investors, he told us.   Many are looking for a good hedging option to dollar and sterling exposure, and for them, investing in Germany makes the most sense.

A lot of people in the German real estate industry hope he is right.  However, there’s no escaping the fact that many of those war-chests have so far failed to be wheeled into action – largely because sellers aren’t prepared to sell at current prices.  Hence the current dearth of transactions.

Equity capital is the key, everyone agrees.  If you’ve got it, there’ll be plenty of opportunity to flaunt it.  But not quite yet, apparently – since everyone is also agreed that unemployment is going to rise as the industrial sector and exports suffer from the collapse of our neighbours, like our Greek friends.  At the same CIMMIT event, the chief economist of the ECB expressed his confidence that pressure by institutions and open-ended funds to invest in office properties will hold prices firm, despite rapidly rising vacancy rates. 

I can only conclude he meant prices in Germany.  For if he, and Andreas Quint of JLL, are both correct, funds will start to flow from the peripheral regions of the Eurozone and into the dominant string-puller, agenda-setter and ultimate Schatzmeister – at the expense of other markets.

For it’s not easy to see how prices of office properties in the weaker peripheral European nations can avoid further weakness in the short term, given the cutbacks and constraints their economies are being exposed to as the price of their economic salvation.  Ireland, Spain, Italy, Portugal – all are likely to suffer from lowered demand as their industries and public sectors are pushed through the wringer over the next two years.

Those other old Greek owls, of the aviary variety, were often depicted sitting on the shoulder of Athens’ protector, the goddess Athena.  Their reputation for wisdom stemmed, above all, from their ability to see in the dark.  They’re about to need all the visibility they can get.

Related posts:

1. JLL’s Quint sees Germany benefiting as larger economies are favoured
2. Whatever happened to that wave of distressed selling?
3. The importance of a good hedge, when doing God’s work
4. Anybody out there NOT looking for prime, core-plus, fully-let, to blue-chip tenant…?
5. When I hear the word “Sustainability”, I reach for my revolver