Jon Zehner: Wide ranging discussion and a virtual walking tour

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Jon-Zehner-JLL-96Hello again. Before I head to bed, I want to share with you my perspective on the day today. Having had the pleasure of bumping into some old friends that I hadn’t known would be here in Davos, I had to really think twice to make sure that I didn’t say hello to two familiar faces as we passed each other in the hallways. It wasn’t that I didn’t want to be friendly, it is simply that I don’t actually know them. Their names are Richard Quest and Fareed Zakaria, two broadcasters who are on television news frequently. Phew, that would have been awkward!

Other than that and some client meetings, I listened in on some infrastructure and energy discussions and participated in a capital markets discussion in an emerging economies session. Lastly, I listened to the Premier of China, Li Keqiang speak. His theme seemed to be encouraging more entrepreneurial activity, in addition to reiterating that China’s economic growth was strong and would not be subject to a major downturn and that China’s intentions were always peaceful. Politicians in public speeches can sometimes spend a long time saying not so much of note.

The infrastructure discussions point to major funding shortfalls as the world’s developed countries’ infrastructure is ageing and much needs to be replaced. Interestingly, this includes oil and gas pipelines and this will likely be tougher to fund given the current oil price. The developing world needs more funding than the developed world and as their infrastructure will be built new, they may well leapfrog the developed countries in the sophistication of their infrastructure. A common theme seems to be that subsidies for fossil fuels should be reduced as the oil price has dropped due to market conditions. I remain somewhat confused as to whether the growing need for energy will actually be a growing need or whether technological advances will make energy usage more efficient, thus lowering demand. Although I think that infrastructure and real estate are different businesses /asset classes, my impression is that we need to be talking to each other more.

In our capital markets discussion, we broadly concluded that stable macroeconomic conditions, rule of law, and transparency are pre-requisites for a solid capital market. We further agreed that a country’s debt should be denominated predominantly in their domestic currency, but that equity markets do not really care whether the underlying investors are domestic or not. Foreign Direct Investment is the preferred type of investment from a country’s perspective and this doesn’t require a domestic capital market, although many of the same pre-requisites apply.

Overall, this was a very multi-cultural day with many discussions that are unusual in the real estate/property world, at least as I know it. Trying to maintain a bit of a building theme to this year’s blog, it feels as if I have had a walking tour of Istanbul during which I have done my best to absorb centuries of history with different peoples and different religions and knowing that I am not fully understanding much of what I am hearing. Nonetheless, I fully understand that the Hagia Sophia is amazing.