Transcript CB Richard Ellis

European Investment Briefing
Presented by:
Michael Haddock, Director, EMEA Research & Consulting
05/10/2010
Global Research and Consulting
Key themes for today’s market
 The downturn was syncronised
– the recovery is more uneven
 Uncertainty is everywhere
– not least in the economic outlook
 Debt is available to buy commercial real estate
– but only if you don’t need it
 New allocations to real estate are coming at the
expense of bonds, not equities
Changes in risk free rate
10-year government bond yield
Yield shift in 2010
5.0
-101 bps
-109 bps
-92 bps
-128 bps
-73 bps
-30 bps
4.5
4.0
'Jan 08
3.5
'Jan 10
3.0
'Jul 10
2.5
23-Sep
2.0
1.5
1.0
0.5
Source: ECOWIN, Financial Times
Japan
Switzerland
USA
France
Germany
UK
0.0
Investment Activity
Global Research and Consulting
Investment market turnover in Europe
€ Billion
80
70
60
50
40
30
20
10
0
Q1
06
Q2
06
Q3
06
Source: CB Richard Ellis
Q4
06
Q1
07
Q2
07
Q3
07
Q4
07
Q1
08
Q2
08
Q3
08
Q4
08
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10
Q2
10
Changes in investment market turnover
H1 2010 versus H2 2009
+250%
200%
150%
100%
50%
0%
-50%
CEE
Source: CB Richard Ellis
Germany
Nordics
Europe
UK
France
Benelux
Iberia
Italy
Economy, Occupier Markets,
Vacancy & Development
Global Research and Consulting
Extent of the recession
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
Source: Eurostat, CB Richard Ellis
Ireland
Finland
Denmark
Hungary
Sweden
Germany
Italy
UK
Greece**
Czech Republic
EU27
Netherlands
Spain
Austria
Potugal
Belgium
France
Norway
Switzerland
Poland
Peak to trough decline in output (% of GDP)
**still in recession as at Q2 2010
Source: Consensus Forecasts Inc
Greece
Spain
Ireland
Potugal
Hungary
Finland
Italy
Austria
EU27
Denmark
Netherlands
Belgium
France
UK
Czech Republic
Norway
Switzerland
Germany
Poland
Sweden
Future economic growth
Real GDP growth
4%
3%
2010
2011
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
European office absorption and vacancy
Net absorption (rolling six months) and vacancy (% of stock)
4,000
Net Absorption
10%
3,500
Vacancy
9%
500
3%
0
2%
-500
1%
-1,000
0%
Source: CB Richard Ellis
2010
4%
2009
1,000
2008
5%
2007
1,500
2006
6%
2005
2,000
2004
7%
2003
2,500
2002
8%
2001
3,000
Office development – Western Europe
‘000 Sq M
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Source: CB Richard Ellis
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
0
Office development pipeline
Currently vacant office space, plus developments scheduled for
completion by end 2012
As percent of Stock
25%
20%
Development Pipeline to end 2012
Vacant Q2 2010
15%
10%
5%
Source: CB Richard Ellis
Paris Centre
West
London West
End
London City
Munich
Berlin
Hamburg
Brussels
Madrid
Amsterdam
Frankfurt
0%
Office rent cycle – Q2 2010
As at 30th June 2010
Rental Decline Accelerating
Rental Decline Slowing
Rental Growth Accelerating
Rental Growth Slowing
A Athens
Madrid
M
M
Manchester
Helsinki
H
B
Birmingham
Bucharest
B
F
Frankfurt
M
Moscow
W
Warsaw
G
Geneva
P
Zurich
B
Prague
M
Lisbon L
Rome R
Copenhagen C
Munich M
Budapest B
Vienna V
Edinburgh E
Barcelona
B
Milan
D
L
Z
H
Dublin
T
A
London TV
Lyon
Berlin
Hamburg
Amsterdam
NB. Markets do not necessarily move along the curve in the same direction or at the same speed.
The rental cycle is intended to display the trend in net effective rents
L
O
P
D
S
B
L
London City
London West End
Oslo
Paris
Dusseldorf
Stockholm
Brussels
Capital Values and Pricing
Global Research and Consulting
Drivers of capital values
EU-15 Offices Capital Value Growth, % per annum
30%
Yield Impact
Rental Impact
20%
10%
0%
-10%
-20%
Falling
-30%
Jun-88
Jun-90
Source: CB Richard Ellis
Jun-92
Jun-94
Falling
Jun-96
Jun-98
Jun-00
Jun-02
Jun-04
Jun-06
Jun-08
Jun-10
Capital value change: June 09 to July 10
Monthly Index - Prime
Monthly Index - Secondary
All Property
Shops
Retail Warehouses
Shopping Centres
CL Offices
M25 Offices
Regional Offices
Industrials
-15
Source: CB Richard Ellis
-10
-5
0
5
10
15
% Change
20
25
30
35
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Prime – secondary yield spread
5.00%
UK secondary yield spreads
4.50%
4.00%
Retail
Shopping Centres
3.50%
Offices
Industrial
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Source: CB Richard Ellis
Summary
Global Research and Consulting
Conclusions
 Prime – Secondary dislocation is the key feature of
markets everywhere in Europe
 Investors
– Investment activity driven by risk averse institutional
style capital
– Lenders have no appetite for secondary either
 Occupiers
– Weak net absorption
– Uncertain economic outlook
– Any rental growth is due to lack of development activity
Panel Discussion
Jonathan Hull, Head of EMEA Capital Markets
John Welham, Head of European Retail Investment
Peter Schreppel, Head of International Investment, Germany
Natale Giostra, Head of UK & EMEA Debt Advisory
Global Research and Consulting
Investment market – Germany
Total value of transactions by purchaser nationality
Germ any
56%
Germ any
87%
Netherlands
16%
UK
5%
UK
8%
Spain
2%
Netherlands
1%
South Korea
8%
UAE
1%
Others
4%
USA
7%
Others
5%
2009
Total transactions €10.45 billion
Source: CB Richard Ellis
H1 2010
Total transactions €8.65 billion
Panel Discussion
Jonathan Hull, Head of EMEA Capital Markets
John Welham, Head of European Retail Investment
Peter Schreppel, Head of International Investment, Germany
Natale Giostra, Head of UK & EMEA Debt Advisory
Global Research and Consulting