The wait is long, and we start from the bottom…
Around this time last year, I wrote that “we live in interesting times.” That statement still holds true today, and I dare to say, times have become even more interesting. Deals are no longer just put on hold, after delayed negotiations, but many of them seem to get stuck right at the start. The sellers are not yet ready to accept the new price levels which has led to this stagnation on the market. Increasingly, projects face situations where not a single offer comes through. Progressing from such a starting point proves challenging.
However, there’s plenty of work for advisors as owners are currently active in scrutinizing their portfolios. They’re examining where they could find liquidity and what might need to be trimmed—preferably at a good price, of course. Here at Reagle, we continue to work towards improving liquidity of the transaction markets so that buyers and sellers would find each other. However, we aim to maintain our integrity, particularly in pricing of the assets. We believe that painting overly rosy pictures for sellers won’t solve anything. One could argue, in fact, that it creates more problems.
In our opinion, there are currently two particularly worrying trends in the market that should be followed. The first is the downturn in the construction industry. How long will it last, and how steep is the decline and where? Right now, it doesn’t look great, and lately we have seen several bankruptcy filings from relatively large developers.
The second point of interest is the wellbeing service counties and the rental agreements that cities and municipalities have made with these prior to the reform. Will the disagreements be resolved in a satisfactory manner to all, or will we see more dramatic developments? We’re watching these trends with great interest.
Again—there’s plenty of capital keen on entering the real estate market, but there are still no concrete signs, in big picture, that the pricing is sensible from the buyers’ perspective. However, for most of us, predicting the exact bottom of any market is nearly impossible, so if you are looking to invest and see a property that is a strategic fit for you, it probably makes sense to buy it. If you are a seller and you must divest, it makes sense to accept the current pricing levels and stop daydreaming of the valuation levels quoted in the valuation reports.
#NotJustAnAdvisor
– Henri Hakala
Reagle’s fiscal year ended in August and it was an interesting one
For Reagle, in the fiscal year 2022-2023, everything grew except revenues and profits.😉
Our service offering has strengthened, and we can now serve our clients in an even broader capacity. We successfully set up our Swedish office, and the operations are running smoothly. The first transactions are in the due diligence phase, we already have a healthy number of clients, and we have just hired our second employee for the Swedish office.
At the end of August, we also concluded our strategic period, and our new 3-year plan is nearly finalized. Our focus areas for the upcoming period involve internationalizing the business and diversifying revenue streams across different operations to make the business more resistant for times like these when the transaction volumes are low. However, our number one goal has never changed, and never will – to create value for our customers.
Let’s keep in touch!
Henri Hakala
henri.hakala@reagle-fi
+358 415 063 101
About the Market
Value is an opinion.
Property valuation by its nature is an opinion based on the assumptions that derive from data and facts. It always consists of a degree of uncertainty. In a transparent and functioning markets, professional property valuators can deliver market value easily. This is done by considering the market conditions with evidence from the market e.g. real estate transactions. As a result we have the valuation.
Forming these conclusions and arguments about the market value has become difficult and volatile in the uncertain and chaotic times. The fact is that when the market changes fast the valuations vary. We are in a loop; the lack of real estate price evidence creates volatile market values which stalls the transactions.
Below is a graph of the yearly difference between lowest data point and highest data point of the prime office yield Helsinki by major real estate advisors (Newsec, CBRE, JLL, KTI). Simply put max yield – min yield. Yields are collected from open publications.
What the graph shows is that when the difference is small the opinions of the prime yield should be in line between the advisor companies. Looking at the graph the highest spread hits in 2020-2021 when the lowest yields of low 3 % were recorded. Interestingly lowest spread was witnessed when interest rates started to rise and there was a need to adjust the yield. SInce 2022 range has continued to widen.
Prime yields are quoted quite a lot and under the radar constantly. Uncertainty is more evident in the secondary markets. The graph below shows the same range spread but from Ruoholahti offices. After 2020 the range increases are apparent. Thinking this in values the difference in market value is 10 % with similar buildings.
In conclusion, as uncertainty increases, and market evidence is scarce, two things arise as important elements in valuations: modeling the market right and discussion with market players.
Here is how:
Modeling: It is time to elevate Finnish real estate market to more precise and quantified analysis of the market changes and evidence. It is important to be able to show uncertainties and risks in numbers. With correct data the market is more transparent and predictable. We can do better.
Discussions: Let´s talk. Having the right sense of the transaction market will bring a mindset more accurate market level. Keeping in mind that price is not always the market value.
Value is an opinion, and everybody has a right to their opinion, but nobody has a right to be wrong in their facts.
Want to talk about data and insights?
Olli-Pekka Mustonen
olli-pekka.mustonen@reagle.fi
044 522 26 39
Meet Pia and Meri, our social media team!
Reagle’s Associate Pia-Sofia Lehtoniemi and Analyst Meri Kiikka are sending their greetings. Wonder why you rarely see this wonderful duo on our social media? Well, usually they are the ones behind the camera and the master minds behind our informative and entertaining social media content.
“We have done Reagle’s social media for a little over a year now and it has been a fun variation to our normal day to day tasks. We want to share our atmosphere with others, and it has been nice to see how the team gets excited about our post ideas and throw themselves into them. We don’t take ourselves too seriously and feel that it makes our content easy to relate to.”
Hope you are already following us 😉
Reagle’s LinkedIn
Reagle’s Instagram
Aleksi Siimestö takes on a new role as Associate Director
We are happy to share the great and exciting news – Aleksi Siimestö was appointed as an Associate Director in late June, right before holiday season.
Aleksi joined Reagle team three years ago as an associate working with the transactions team. His role has developed during past years – the projects as well as responsibilities have grown in scale. While he continues to serve Reagle clients in wide spectre, in his new role he will focus on leading projects. Our warmest congratulations to Aleksi – we are looking forward the next steps on your Reagle journey!
“I’ve witnessed some of the rare early moments of Reagle through its founding partners, Henri and Alexander, even before I became a part of this now well-known convocation of eagles. During my three years here, I’ve watched the company transform from a modest group of seven into a thriving group of twenty.
With a background spanning nearly a decade in commercial real estate prior to joining Reagle, I dived headfirst into our then-classic crucible – orchestrating the divestment of an office building in the city of Kouvola. This initial triumph paved the way for many future endeavors, ultimately leading to this appointment, for which I’m thankful.
Continuing onward, I am dedicated to serving our customers through both seller-, and buyer-side transactions, leveraging my expertise as an authorized property valuer, and contributing to various value creation projects.
Anticipating the future with eagerness, I look forward to seeing what lies ahead for Reagle!”
– Aleksi Siimestö
Let’s catch up!
Aleksi Siimestö
aleksi.siimesto@reagle.fi
+358 50 523 2002
Case REFE (Tilastokeskus)
We are thrilled to announce that we have served as an official data provider for the national research body, Statistics Finland. In our role we have supported Statistics Finland in creating a commercial real estate price index. This endeavor is an integral part of a larger initiative by the European Central Bank to keep tabs on commercial real estate trends across European nations.
To tackle the challenges of index construction, particularly the critical need for a comprehensive foundational dataset, Reagle employed its expertise to meticulously evaluate over 6,000 real estate transactions spanning from 2015 to 2022. Utilizing a robust network and sophisticated data models, we took the unprecedented step of diving deep into each portfolio transaction to isolate individual properties, providing an unparalleled level of granularity to the existing data.
But we didn’t stop there. To enrich this already robust dataset, we augmented it with valuable external sources, including details like construction year, building identifiers, and much more. Plus, all transactions were geocoded to highlight the potential impact of location factors.
By participating in this deep statistical analysis and development process, Reagle has significantly contributed to the advancement of index construction possibilities. “We are honored to be part of a project of such immense economic and social impact, and we look forward to continuing our work in elevating the state of real estate data analytics!”
NEW PRODUCT
Reagle Relocate
Reagle Relocate
We have productized a new, better, more efficient and comprehensive tenant representation service, for which we have already acquired many new clients.
We strongly believe that a comprehensive real estate advisory service combined with systematized project management and data truly benefits the real estate users and tenants of all industries both financially and operationally, and will play a key role in tenant’s real estate decision making process. We are looking forward to rolling out this turnkey service to our existing and new corporate clients to make their real estate relocation or renegotiation processes and decision making easy, light on resources and hassle-free.
Want to hear more about Relocate?
Markus Malamo
markus.malamo@reagle.fi
+358 44 989 2887
Greetings from Reagle Invitational Golf 2023
“The annual Reagle Invitational golf competition was played in the beginning of September. Thanks to all who participated and congratulations to the winners!”
