LIVE BLOG: JLL CEO Colin Dyer at Executives’ Club of Chicago Global Leaders Luncheon

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JLL CEO Colin Dyer (second from left) is one of three panelists at today’s Global Leaders Luncheon hosted by the Executives’ Club of Chicago. The topic is “Capital Flows and Global Footprint” and the other panelists are David Sayer (second from right), Global Head of Banking for KPMG, and Hung Tran (far right), Executive Managing Director of the Institute of International Finance. The panel is being moderated by Robin Bew from The Economist (far left).

Below are some highlights from their conversation:

12:35 p.m. — Colin Dyer:  “In 2007, international investment in commercial real estate across the world totaled $750 billion. That dropped after the crisis back to around $150 billion … What we’ve seen since then is a gradual re-establishment of confidence and a rapid re-establishment of the amount of equity that international investors have been putting into real estate to the point where our forecasts expect that, next year, investment in real estate globally will be back to the levels we saw in 2007 … There is a huge amount of equity going from the U.S. to Europe and from Europe into the U.S.  And the multi-polar side has grown as well. We’re seeing, now, a lot more equity flowing from Asia into the West.”

12:39 p.m. — Hung Tran: “Total cross-border capital flows have declined from $8.5 trillion to $3 trillion since the peak in 2007. It’s driven mainly by banks withdrawing from investing cross-border.”

12:42 p.m. — David Sayer on the aftereffects of increased regulation: “Banks have become safer and it’s important that banks are safe. But the cumulative effect of regulation has been that we’ve now gone beyond the tipping point to where regulation is inhibiting economic growth. There’s been a huge deleveraging … a huge reduction in the capacity of banks to support trade finance. The conclusion, when history is written about this period, will be that we’ve probably gone too far.”

12:45 p.m. — Colin Dyer: “For large real estate deals, particularly the high-quality deals that have been in vogue since after the crisis, investors with good equity sources are able to find the necessary levels of debt that they need to do their deals. The change has been that they’re now sourcing that debt largely from local sources. Rather than international banks setting up shop in the U.S. — they’re not here any more … same phenomenon in Europe, the Far East and the developing world.  But debt is available. It’s more local than it used to be on the whole, it’s better undewritten, and the levels of debt-to-total-value have become more conservative.”

12:47 p.m. — David Sayer: “It worries me, in a world that is changing so quickly, that banks have no ‘change capacity’ to respond to [entrepreneurs].”

12:54 p.m. —  Colin Dyer on the role of the emerging world (eg., China) as the dominant player versus the U.S.: “We’re moving in that direction, yes, but money is now flowing out of China in the order of $10 or $20 billion this year in the context of a $350 billion U.S. commercial real estate market. The difference is that the U.S. capital markets are so huge and deep that when you compare them to China, they’re still comparatively underdeveloped. But the movement has started.”

12:58 p.m. — David Sayer: “China is going to be quite cautious in the way they invest. The bold investments are going to be from Chinese corporations and the individuals there who are becoming among the wealthiest in the world.”

1:04 p.m. — Colin Dyer: “We’ve noticed a diffence in the past 5 years that something has happeneed in China which is a policy decision on behalf of the government to push the regulartiory environment to allow the companies to operate and invest more internationally. When that money starts turning outward, there will be a very significant change over the coming decade.”

1:06 p.m. — David Sayer: “The Chinese consumer looks for great value and great quality and great prestige in a brand. But any [company] that piles into China and believes they’re going to penetrate the market like they have elsewhere, [they are mistaken.]”

1:08 p.m. — Colin Dyer: “China is a really hard place, as most emerging countries are, [for Western companies to do business]. At the end of the day, China has a nationalistic approach to business. Ultimately, they want the majority of their economy to be owned and run and controlled by China’s companies rather than western companies so there’s a lot of pressure toward ‘Chinafication’ of business.”

1:10 p.m. — Colin Dyer on Chinese real estate development: “Geographically, there’s been a big shift … [Development] is following the population — it’s going west as well … What used to be built 20 years ago were big factories near the coasts with big warehouses to take goods out of the country on ships. There wasn’t much retail sepending and the consumer economy wasn’t very healthy. There were no big shopping centers and the city center office parks were of low quality and largely filled with Chinese companies. What’s changed is that people aren’t building so many factories anymore and, if they do, they’re high-tech high-value factories and they tend to be more inland because the land costs are so high [near the coasts]. The consumer economy is growing so there’s also a push toward developing high-quality shopping centers and, with that, distribution is moving inward toward the consumer centers. Lastly, there’s also massive amounts of construction for residential … the vast majority of which is being constructed is to meet the massive demand in major cities for people to have basic homes. In the next 10 to 15 years, 200 to 300 million people will move into [China’s] cities from the countryside, so there’s a tremendous pressure in terms of demand for housing.”

1:14 p.m. — David Sayer: “I’ve never known such an uncertain world. Setting a strategy which is resilient in all scenarios has never been harder, but setting a stratgy based on the assumption that everything is going to turn out alright is just wildly optimistic.”

1:15 p.m. — Colin Dyer’s advice to local companies considering expanding overseas: “You’ve got to look inside your business and look at what your strenghts are. If you are robust enough to operate internationally then go do it because there are a lot of big markets out there.”

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