Beating Forecasts, Germany Gallops into Online Retail


Alike other develop markets across the world, traditional retail continues to face pressure from the growing e-commerce sector in Germany. Data from the Germany Consumer & Retail Report Q4 2017 suggests that within 10 years online purchases rose from 37.3% of the population to 70.4%. The response of retailers is typically expanding into the online sales themselves,  increasing competition within the industry.

Keith Knutsson of Integrale Advisors commented, “despite Germany’s conservative market structure, past forecasts regarding online retail were underestimating the adaptivity of the German consumer,” further adding, “analysts might be wrongfully tempted to limit the horizon of technology to retail even though there is a myriad of opportunities for the market to expand.”

Within this online marketplace, Amazon Germany remains the industry leader. It established a workforce of 10,000 people and nine major logistic sites in a rapidly developing market. The opportunity for Amazon’s third party retailers outside of Germany to establish steady cash flows from sales in the market further presents dependency and growth potential on the retailer.

Another major player in the industry is the online fashion retailer Zalando, founded in Berlin in 2008. Spanning over 15 markets in Europe, it has grown to over 10,000 employees and serves as a key entry point for brands new to the German market. The company envisions an increasing demand across Europe for online retail, investigating opening additional fulfilment centers outside the country.

The growth of online sales is eating into the profitability of major department stores, but investors should be careful of completely dismissing opportunities in this sector. While Karstadt’s recent bankruptcy serves as a reminder for the difficulties in this space, M&A activity could predict a reversal in the trend.

Prosperous European Real Estate Market Leads to Growth for Alternative Assets


Low interest rates imposed by the European Central Bank have made the European real estate market surge in foreign investments in recent years. The artificially low rates deem stocks risky and bonds expensive, nudging people to real estate investments instead. Additionally, momentum on real estate prices has occurred amidst quelled concerns regarding a rise in European populism, pricing in political stability and success of the Eurozone’s economic recovery.

CBRE Group analyzed investor’s preference for the European market and attributed it to widespread attractive Sharpe ratios, liquidity, transparency, and strong economic fundamentals growing rental value in the area.

In these flourishing market conditions, Germany emerges as a hotbed for real estate investments, while ongoing Brexit negotiations have seized London’s long-established place at the top.

The European real estate transaction volume has been experiencing steady demand and shortage of supply. Yet it is the new market trends are hidden within the promising industry performance; investments in alternative real estate (e.g. datacenters) are benefiting due to urbanization and changing consumer habits of e-commerce. Per the Global Alternatives Survey 2017 produced by Willis Towers Watson, investments in alternative assets have hit $6.5 trillion for the first time, with real estate managers managing the largest share of assets at 35%. While the report cautions investment strategies on debt leverage, European investment are regarded as safe for “as long as prolonged deflation can be avoided.”

Keith Knutsson from Integrale Advisors commented on the growth of alternative assets, stating that “for investors to continue locking-in alpha opportunities in a capital-filled, low supply market, new forms of alternative assets are vital.”

Principle Valued Approach outlined by Keith Knutsson


Successful real estate investment requires an enormous amount of commitment, sometime requiring more hours than the typical 40-hour work week. But, this comes easily when you are incredibly passionate. Investment management professionals must balance on the entrepreneurial tight rope, sticking to their niche market, seeking off market deals, and leveraging the full capacity of your team. Naturally, tension arises and there is a need to change gears, which requires patience.

Some of the most successful centi-millionaire family offices steward their money effectively because the approach is concise, with efficient means of implementation, and strategic. While some deals go smoothly and others feel like roller coasters, being able to maintain composure and patience while enduring the short-term calamity is key for focusing on the end-goal.

In contrast, those who fail to occupy enough valuable land, don’t envision the long-term, don’t add value, don’t optimize their operations, and are impatient. As specified by Keith Knutsson of Integrale Advisors, “the key is to identify a niche and commit, regardless of distractions.” A niche offers credibility as well as an ease of communication with a common goal in time. Intrinsically investing in your company is important because it is ultimately the driving force that sells others and convinces others that they feel comfortable putting their money with you.

Keith Knutsson evaluates Blockchain and the Commercial Real Estate Industry


“Blockchain will have a significant impact on he Commercial Real Esate Industry” states Keith Knutsson of Integrale Advisors.

A blockchain is a type of decentralized database that supports and provides a constantly expanding inventory of records, termed blocks, which are fortified against alteration and adjustment. Each block possesses a timestamp and a link to a previously created block. As a blockchain runs, it effectively serves as a log for all transactions. Every user is able to link up to the network, post new transactions and authenticate transactions. Blockchain has seen tremendous growth in the past couple of years. In fact, some of the world’s largest banks, central banks, governments, universities and technology companies are working with blockchain, with implications soon to be seen in the commercial real estate market.

If the commercial real estate industry utilizes blockchain, the impact would be huge. The blockchain could provide information regarding all buyers, sellers, title work, reporting, lease comps and vendor work on any individual commercial property. Having this information at your fingertips could cut out paperwork, enhance market transparency and shorten the speed to competing a transaction from days/weeks/months to minutes or seconds.

Blockchain has the potential to:

  • Enable a commercial property to have a digital signature containing building reports, performance, and legal information. This information could be easily accessed online by authorized users.
  • Allow for commercial real estate deals to be concluded in a matter of seconds.
  • Better administer the commercial property sales or lease payment process.

Real estate transactions will start to resemble the buying and selling of commodities. With blockchain, properties in popular areas could change owners many times a year, month, or even week. The system aims to make property purchases quicker, cheaper and more secure by storing all title information digitally and enabling virtual transactions to take place. This is the future of the real estate market.

The Benchmark Developments on the East Coast


All around the United States, particularly in big cities, there is rampant construction as capital flows into large urban areas. Q1 and Q2 2017 have revealed construction of 40 million square feet of office development. At this pace, new office space will, for this fiscal year, will be more than this past year’s construction of 76 million square feet and already more new space than all of 2015. Keith Knutsson of Integrale Advisors claims, “current market indicators point to commercial real estate remaining on a strong path for investors in 2017.” On the East coast, Washington D.C., New York City and Boston all have significant high-rise developments in large downtown markets.

In Washington, DC, developer Hoffman-Madison is overhauling 24 acres of waterfront land along the Potomac River. The Wharf project, once completed will bring 3.2 million square feet of new space to the area. A unique component of the development is an entertainment street named Jazz Alley, containing a concert hall, boardwalk and pier, rum distillery and one of Hilton’s popular Canopy hotels. In addition there will be two waterfront luxury condos, as well as the prior announcement from the American Psychiatric Association to occupy 63,000 square feet of office space, the first tenant for The Wharf.

New York, New York continues to find new plots to develop. Most recently, the Hudson Yards and West Manhattan are being developed. The Related Cos. $20 billion development is speculated as the most expensive development currently in the world. This investment is a composed of EB-5 investors that will fund the new mega development. EB-5 investors consist of foreign investors that reap benefits from the United States government, such as expedited citizenship for family members, while helping out with domestic jobs and capital flow into the United States. Related along with Oxford Properties Group have already raised $600 million in EB-5 funds. U.K. based Children’s Investment Fund agreed to a $1.2 billion construction loan to both developers in order to commence construction. The development is leasing up quickly with tenants, most notably Time Warner along with several of its subsidiaries.

In West Manhattan, Brookfield properties is leading the development of 1.5 acres of mixed-use space consisting of a 60,000 square foot Whole Foods, and is being viewed as a “major culinary anchor” to the area. Notable tenants are the National hockey League and the Skadden Arps law firm, who will occupy some of the 2.1 million square feet of space in the emerging 67-story One Manhattan West tower, making it one of the tallest buildings in the city.

Finally, the Seaport project by WS Development is underway in Boston. Located on the waterfront and only minutes from Logan International Airport, the aim is to convert 23 acres into one of Boston’s most vibrant mixed-use communities. The development is composed of 2.8 million square feet of office and research space and 3.2 million square feet of residential space. This will be blended into the landscape containing 8.8 acres of green space and four new hotels.

The Safety Third Culture


Frequently in the work place we are bombarded with the redundant safety protocols and procedures to ensure injury prevention. Safety Third is a concept that Mike Rowe of Discovery Channels, ‘Dirty Jobs’ came up with after filming several seasons in uniquely dangerous situations. The underlying idea behind it is to promote safety for yourself first, then others around you, and finally what the company would like you to be safe about. However, for good reasons, companies invest significant resources into reducing exposure to risks for their tenants, employees, and customers.

Frequently we look at these sometimes-ridiculous regulations and restrictions as inhibitors to what we really want to do. But what cannot be debated is the positive effect of health and safety legislation over time. Namely, since the introduction of the Health and Safety at Work Act passed in 1974 in the United Kingdom, there has been an 85% decline in the number of work place fatalities.

A firm’s brand success is defined by the service excellence and the provision of encouraging safe places to work, shop and live. Serious damage can be done to a firm’s name in the event of an unexpected incident. At Cushman & Wakefield, they promote a Health, Safety, Security, and Environment (HSSE) in their company culture. They conduct this in way that blends into every aspect of their working lives through partnerships with employees and security in the environment, based on continuous improvement.

To incorporate this philosophy effectively three components must be implemented: Leadership, systems, and culture. By endorsing strong leadership involvement in safety programs, this benefits employers and employees alike. If there is an area of concern an employee becomes aware of, they can give feedback to their line management to seek implementation of new safety procedure. Keith Knutsson of Integrale Advisors speaks on means of implementation claiming, “systems offer streamlined and integrated implementation of new safety protocols.” This open dialogue of HSSE allows for better management of risk and encourages innovation and improvement in services and products that would not otherwise come about.

Disruptions Through the Lens of Opportunity


Amid competing to be a top performer in macro real estate markets, there are certain traits that distinguish the good from the great. Many occupiers have been forced to adjust to market demands, specifically – new technology, the battle for talent, and slower economic growth – compelling investors to adjust to meet the needs of their tenants. Huge demand across global markets is the result.

Technology continues to influences our everyday lives more and more whether we are paying attention to it or not. Technology continues to mold the way in which we conduct business. Traditional businesses are having to adapt to the new methods to stay competitive. The ‘how?’, ‘why?’, and ‘where we work’ has been completely deconstructed taking on new meaning. In a recent McKinsey Global Survey, 71% of individuals believed that enhanced digital capabilities increased profitability. On the other hand companies resistant to change may face uncertain futures due to the magnitude of the digital disruption.

The work force has also seen a large disruption due to technology. In a survey of C-suite level executives 90% report that a retention among technology talent is a priority amongst the gamut of business challenges. To expound upon this, in the U.S.A.’s Council of Advisors on Science and Technology predicted by 2020 for there to be a shortage of 1 million technical professionals. Therefore, the battle for technical talent will continue to grow, according to statistics.

Recently, the International Monetary Fund (IMF) issued a global economic forecast called ‘Too slow for too long’. Although the IMF does not seem optimistic, there is always opportunity. Disruption through corporate response combined with slow economic growth is a breeding ground for ideas. On one side, stymied growth has forced businesses to become savvy in reducing operational costs and protecting margins. However, corporate confidence is low and acts as a brake on business investment. Many commentators are referring to this established reality as a ‘new normal’.

Global Cities are seeing increased levels of occupier mobility as disruptions continue and new geography of occupancy emerges. Foreign direct investment (FDI) has been steadily increasing since 2012 and provides strong evidence to support the globalization of occupier activity. As reported by, the Organization for Economic Co-operation and Development (OECD), global FDI flows were up 25% year-on-year in 2015 at around $1.7 trillion. Both financial and corporate restructuring contributed to this being the highest volume of flows since the beginnings of the financial crisis in 2006.

The traditional spatially fixed occupier is being questioned and redesigned to accommodate a nomadic type of worker. It is noted in Knight Frank, Global Cities, that “fragmentation of business processes ha[ve] led to the rapid rise of ‘shoring’. . . [and] relocated to locations that have clear labour or cost advantages.” Cities that have benefitted greatly from this are Bucharest, Manila, Shanghai, Warsaw and Bangalore. There is also anticipated growth in Trinidad & Tobago, Kenya and Peru.

Young vagabond workers are seeking a more flexible space in densely populated cities such as Berlin, Austin, London, Seoul, Tel Aviv, and San Francisco. These cities have prospered due to the strong digital demographic. An example of corporate leadership through future foresight can be observed in General Electric’s decision to relocate from Fairfield, Connecticut to Boston, Massachusetts. Their vitality as a company is contingent upon their success in the software innovation and finding tech talent. Another example is Amazon’s decision to move from Slough, in Berkshire to the Shoreditch tech cluster of London. Also noting this shift is Integrale Advisors’ Keith Knutsson, claiming “flexibility is the driving force today for choosing a dream workplace.”

Emerging in the background, there will continue to be an onset of robotics and Artificial Intelligence (AI) that will disrupt current market conditions and create new business processes. As these altering forces take root, new property and location choices will be essential. Dr. Lee Elliott, head of Commercial Research for Knight Frank, said it best, “as many age old businesses will testify, complacency never pays in a disruptive environment.”

“How Today’s Generation is Turning Homebuying on its Head” examined by Keith Knutsson


According to the National Association of Realtors, for years, the American Dream included a stable job and a comfortable suburban home close to good schools. If all went according to plan, that classic white picket fenced home was a solid investment for years to come; median home values have risen every decade since the first housing census in 1940. This model is changing with today’s generation as outlined by Keith Knutsson of Integrale Advisors.

“Today’s first-time home buyers aren’t following in the steps of their parents and grandparents. The economic and cultural environment looks quite different. Instead of moving to the suburbs, many are remaining in cities where they had been renting. Or they are opting for homes on small lots in planned communities in walking distance of conveniences like restaurants, grocery stores and shared green spaces similar to that of a large city” states Keith Knutsson

“Technology is also altering the real estate landscape” said Keith Knutsson. Today, real estate agents work with buyers who have already studied the marketplace online and expect quick answers, properties that meet a long list of requirements and help with closing transactions. Oftentimes first time home buyers are relying solely on technology to both buy and sell their home.

Shifting economic landscape

Economic changes have majorly transformed the real estate landscape for first-time homebuyers. In 1950, the median single-family home price was $7,354, or $44,600 when adjusted for inflation. Today, according to the National Association of Realtors®, the median home price has mushroomed to $233,900 in 2016, or five times more than what one paid in 1950.

Keith Knutsson stated “Homes were also more affordable for mid-century buyers, not only because they were cheaper in today’s dollars, but also because they were more reasonably priced relative to income. The median home price in 1950 was about two times median household income. Today, it’s four times.”

That’s what Anna, 30, a new home buyer experienced when she and her husband set out to buy their first home.

After renting a one-bedroom apartment in Brooklyn for seven years, the couple, planning to start a family, looked to buy in nearby South Park Slope section of Brooklyn, hoping for a three-bedroom apartment with enough space to grow.

Sticker shock quickly set in when they realized this would cost close to $2 million. While the couple had what Anna described as “healthy” savings, they still needed a loan from their parents to help make up the $800,000 down payment on the $1.8 million three-bedroom condo they bought in May 2016. That family loan took the edge off the mortgage amount and made them more appealing to sellers.

“The process was pretty long and exhausting,” Anna said. After the couple began their search in September 2015, they had two offers fall through thanks to a buyer who offered more cash down and another buyer who offered all cash. They leaned on their real estate agent to help them navigate the tricky closing process that finally got them to their more spacious home.

Demand for conveniences and the urban experience

One reason for the demand Anna experienced is a desire among many first-time homebuyers for urban living. A surge of both renters and buyers in cities across the country is constraining inventory and driving prices up, putting affordable first homes out of reach for many buyers.

What’s driving this trend? Keith Knutsson suggests “A healthy job market—the unemployment rate among those 25 and older with a bachelor’s degree or higher is 2.5 percent, significantly less than the overall rate of 4.6 percent, according to the Bureau of Labor Statistics. There is also the demand for shorter commutes to work and walkability to bars, restaurants and retail.”

“We love not having a car and being able to take the subway everywhere we need to go,” Anna said. “I was not at all interested in moving to an area where I’d have to take a commuter train to work. And South Slope is actually quiet and calm enough that it has sort of a suburban feel while still having all of the conveniences of a city neighborhood.”

That kind of urban/suburban mix is increasingly attractive to first-time homebuyers and repeat buyers alike.

“The country is becoming more urbanized, with a greater share of the population living in Census-defined metro areas,” said Lawrence Yun, chief economist at the National Association of Realtors®. “That leads to the trend of making homebuying decisions based on commuting patterns, higher land values and the likelihood of not even having a car.”

The changing face of homebuyers

“Demographic shifts are also impacting the current homebuying landscape. While married couples still make up the largest share of buyers at 66 percent, single women are entering the market in greater numbers than before, making up 17 percent of total home purchases—the highest since 2011” states Keith Knutsson.

“About one-third of my buyer clients are single women,” Harrell said. “Women are working and earning more in today’s generation and are waiting longer to marry. They do not need another income to have the means to make their first investment in a home, and they have no qualms about not waiting for marriage before they dig in roots.”

Whereas previous generations of home buyers might have given their real estate agent a short list of desired features, today’s first-time buyers have a more defined sense of what they want, and rely on their agent to help them find a home that meets their unique specifications.

US retreat from global financial system – Keith Knutsson


Borrowers now have access to the savings of the entire world if they can show lenders that they can make effective use of their money. It should also mean that lenders can search, on a global level for the opportunities that give them the best return for the risk with which they are most comfortable. The following should benefit both lenders and borrowers.

For borrowers, the cost of a capital loan should be lower than that on offer in smaller domestic markets. On the other hand, creditors’ returns should be far more attractive since they have more options for where to put their money to work. Since the global financial crises, there has been some negativity in the air. This negativity has greatly increased in recent months. Some regulators and financiers moved away from embracing globalization, further claiming that it led to the crisis. However, there is potential for a turnaround; especially if less developed nations and financial markets can improve the way they allocate capital.

Leading up to the crisis, capital inflows and outflows moved in obstructive ways. It transitioned from higher growth emerging markets to slower growth developed markets. Much of these flows went into US Treasuries to strengthen reserves in the aftermath of the 1997-1998 crises.  Those capital flows to the US and to the dollar, the world’s reserve currency, meant that Americans could pay for larger properties with money that was cheaper than it once was. European banks continued to borrow those dollars in wholesale markets rather than relying on deposits to fund their own activities. This resulted in what international bankers are calling “the transatlantic banking glut”.

Globalization, all in all, meant poor capital allocation of debt and a huge accumulation of unsustainable debt. This resulted in a rolling crises as investors sought high returns in short-term securities, whether in emerging markets, the US, or Europe.

Central banks in developed nations responded to the crises by implementing easy monetary policies. Thus, triggering an artificial rise of asset prices, which led to an increase in capital outflows into emerging markets as yields were driven down at home. “The Fed should remember that when it makes monetary policy it should take into consideration the impact on the rest of the world,” stated Gao Xiqing, the former head of the Chinese sovereign wealth fund. A decline in globalization would result in a retreat from the dollar and from the US-centralized global financial system. The U.S. had advocated for policies regarding this that would in effect extend US control beyond its shores, especially as the new administration is attempting to limit terror financing and money laundering. The rules have become so burdensome for foreign banks that some have closed their US branches.

There is no better depiction of US policies putting a strain on the global economy than in recent Federal Reserve Board actions regarding “swap lines.” A swap line is another term for a temporary reciprocal currency arrangement between central banks. The central banks of two nations agree to keep a supply of each country’s currency available to trade to the other central bank at the going exchange rate. The Fed maintains lines with Japan, the Eurozone, the UK, Switzerland and Canada.

As the US steps back, we see an emergence of other developed nations are filling the role. China, the economic powerhouse, is taking a greater role on the global financial stage. The rest of the world is trying to circumvent the uncertainty of central bankers, US regulators, and politicians.

Although large companies will always have access to global markets, cross-border investment has become increasingly more difficult due to protectionist measures. As a result, this is expected to produce a smaller demand for capital intensive goods and services. If companies are forced to look domestically for funding, that could be a good thing if governments are more effective in making sure capital is properly allocated. However, there is currently little evidence this will be the case.

This and other articles originally published on Keith Knutsson’s Blog

The Gig Economy is Changing the Corporate Landscape – Keith Knutsson


According to a survey, 85% of people are dissatisfied with their jobs (Cushman and Wakefield, 2017). “Flexibility is the driving force today for choosing a dream workplace” said Keith Knutsson of Integrale Advisors. Free communication channels and globalized networks, have allowed for the fast growing “Gig Economy,” which consists of 20-30% of the working population worldwide.

The term “Gig workers” refers to consultants, contractors, or temp workers. The following professions are changing the corporate landscape. Nowadays, companies can easily hire non-permanent employees (temps) on an as needed basis. These “independent workers” are enjoying a balance of freedom, flexibility, and work life. However, there are some consequences. Gig workers lack healthcare benefits and job security.  Nevertheless, it is predicted that 40% of the global workforce will be independent contractors and ‘solopreneurs’ by 2020.

The impact of the gig economy will have a direct effect on workplace of the future. Globalization of work, global trade, and technology shifts have contributed to the rising gig economy.

Reasons for workers to choose independent work:

  • Ability to turn down projects if uninterested.
  • Freedom to choose type of work.
  • Flexibility; when and where to work.
  • Versatility; working on multiple projects for different clients.

Reasons for companies to hire independent workers:

  • Lower office space costs.
  • Reduced cost of healthcare and benefits.
  • Ability to bring in skilled workers/expertise when needed.
  • Scalability; ability to hire workers when necessary.

Analyzing the effect on the corporate environment:

Firms are redesigning their offices to provide fewer private offices and cubicles, and more open and collaborative space. There are two goals: 1) provide workplaces that facilitate collaboration and 2) decrease the firm’s overall rent expenses by providing less physical space per worker.

Companies have leased several million square feet of space in the past few years and that trend is expected to continue with the growth of the “gig” economy. This economy also impacts traditional corporate culture and the engagement of employees. When all employees are engaged, they are more likely to commit themselves to company goals and achieve higher levels of productions.

According to an analysis by Cushman and Wakefield, “65% of today’s school students will be doing jobs that don’t exist yet.” In addition to millennials rejecting traditional employment and choosing to work independently, artificial intelligence and robotics will also be more prevalent in the future. Businesses that will be successful in the future will be those who encourage adapt well to change.