Where European Property
Will Be Hot Or Not in 2008

The European real-estate industry is beginning 2008 more subdued than it was one year ago. The tougher financing climate, coupled with a widespread perception that the market has passed its peak, has sharply reduced transaction volumes.

But deals are still going to get done. While financing is harder to secure, it is still available, especially if buyers are willing to put in more equity. A range of institutions and well-capitalized investors have amassed large war chests to do just that.

Many of them are hoping the increased anxiety level in the market will translate into more-attractive prices. And while some investors are taking a back-to-basics approach, targeting top-quality properties in core markets such as France, others are casting a wider net in search for opportunities in emerging markets such as Russia and Ukraine.

For a look at some of these strategies, The Wall Street Journal spoke to some of Europe's leading real-estate players.

Gerald D. Hines, founder and chairman of Hines Interests LP, Houston

Top picks: I think there will be some opportunities throughout Europe at substantial discounts this year, including publicly traded real-estate companies in the U.K., which have shown a discount of 15% and above.

We have around $14 billion of equity to place on behalf of our funds -- which includes funds for India and Turkey -- over the next several years. In India, we're developing an office building in Gurgaon with DLF. However, there is a danger of overspeculation in India, where the price of land has gotten extremely high. We also see development opportunities in Russia and China.

Not so hot: In the city of London, prices have gotten up very high. Spain, where prices are unbelievably high, is going to see a lull, especially in the office sector.

Paul Bacon, chief executive of Europe, Middle East and Africa region, Cushman & Wakefield Inc., London

Top picks: We really like emerging markets, particularly Central and Eastern Europe. Investment volumes were around €6 billion ($8.8 billion) in the region last year; this could well double this year. There was significant interest in Russia and Ukraine last year; 2008 will be the year they emerge from the shadows. The retail sector in Russia is especially compelling.

Not so hot: The U.K. market is likely to be difficult in the first six months of this year. We have stagnation there at the moment, but when this washes through -- probably in the second half of the year -- I think a lot of capital will come back.

George Jautze, chief executive officer of ING Real Estate, The Hague

Top picks: We are interested in Central and Eastern Europe, which we think is still in good shape. We've just entered the Romanian market, which is attractive because office yields are as high as 7%. We would also like to invest in the retail sector there because of increased consumer spending and lack of good retail space.

We are very interested in Turkey, because of growing consumer spending and its young population, so we would like to invest in the retail sector there.

Not so hot: The U.K. at the moment, because it's too expensive. If prices do come down this year, we will reconsider investing there.

Alessandro Bronda, head of investment strategy at Aberdeen Property Investors, Brussels

Top picks: We're very interested in the Nordic region, especially Norway, due to its strong economy, good employment growth and a healthy supply-demand balance. We'll target office, retail and industrial properties in the region for our Nordic funds.

In France, we will look at offices in good locations in Paris and regional cities, where we expect to see good rental growth of around 4% this year.

Not so hot: We think Spain's retail sector is risky. The construction sector, which accounts for a big part of the economy, is slowing. That will affect jobs. This, in turn, will put the brakes on consumer spending.

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