Real Estate industry

Situation

The current economic downturn has significantly affected a multitude of industries in different ways. The real estate industry has been one of the most impacted ones, having felt credit liquidity crisis more than others. Starting from the middle of last year, a number of real estate developers have been having difficulties obtaining additional funding as these funding sources have all but evaporated. As the effects of the global credit crisis have contained to make themselves felt throughout other industry sectors, the demand for space has also been impacted, as a large number of commercial tenants is scaling back on general space needs.

Halted constructions, frozen development plans, severe employee cutbacks are only few effects of having liquidity evaporating from the system. Tightening credit markets make multiple projects too risky and demand higher returns on investment.

All of the above have a direct impact on commercial and residential real estate. The market downturn also has a secondary effect on banks and investors. Worsening economic conditions in other sectors make it difficult to predict the length and full complexity of the current crisis.

Most real estate companies — both developers and investors find themselves looking for measures that will allow their companies to sustain their business with limited losses. Some of these measures necessitate increasing in investment attractiveness, consolidation of debt, sale of non-core assets. A number of companies have looked at options consolidation of their businesses or selling parts of their businesses. Overall, the real estate sector has to react quickly to the market changes by revising their short- and long-term strategies and implement a number of internal restructuring measures including optimization of reporting processes and cost-cutting.

Measures of success

For many Real Estate companies, the following issues are of high priority:

• increasing company investment attractivness;
• ability to decrease expenses as a result of strategic cost cutting;
• portfolio optimisation, business regeneration and recovery;
• managing people value, aiming to save key performers.