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2016 I 1Global Property Market

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Robust business cycle in advanced economies

Growth slowing in emerging markets

Global Economy

Global: Key indicator and change from last yearThe eight largest advanced economies are expected to con-tribute more to the world’s economic growth than the eight largest emerging economies, in 2015 and again in 2016.Overall, the underlying drivers for a gradual acceleration in economic activity in advanced economies are easy fi-nancial conditions, a more neutral fiscal policy in the euro zone, lower fuel prices, and improving confidence and la-bour market conditions.Meanwhile, Europe’s economic output has regained its pre-crisis level. The US economy cleared this mark earlier. On 16 December 2015, the Federal Reserve Bank of Amer-ica (Fed), raised the key lending rate for the first time since the Great Recession. The interest rates of a few countries remain negative.The economic performance of the emerging economies Brazil, Russia, China, Saudi Arabia was clearly below aver-age in 2015, but is expected to perk up slightly in 2016.Some of the currencies in the emerging economies and the resource-rich countries have lost heavily against the US dollar.Stock markets, too, registered substantial losses during the first six weeks of 2016.

The strongly eroded yields of European government bonds have driven both national and international investors into the real estate market. It is safe to assume that some in-vestors in their hunt for yield have started to cross national boundaries, and commit themselves increasingly in interna-tional real estate markets. Despite the low rates of return on international real estate markets (Hong Kong 2.9%, Par-is 3.5%, London 4%, New York 4%), it is more rewarding to invest in tangible property values than in the government bonds of advanced countries.Increased demand for prime office space has caused prime rents to rise at an average rate of more than 3% worldwide. Yet while prime rents skyrocketed in Stockholm (+15.6%), Hong Kong (+13.3%) and Sydney (+13%), they plunged in Moscow (-11.1%), Singapore (-10.5%) and Sao Paulo (-5.4%). The positive trend of fundamentals in many major mar-ket regions carried over into the second half of the year. Despite the geopolitical uncertainties, the world’s leading business metropolises are expected to see positive de-mand and rent growth.

Continued growth in rents and drop in vacancy rates

20th St & 1st Ave11 Madison Ave

38 Gloucester RdHickson Rd

202 Hubin RdOne Raffles Place

1355 Market St168 Hubin Rd

18 Salisbury Rd12 Songgao Rd

Global Real Estate

Global property indices (01/2006 = 100)

Top 10 transactions in H2 2015 Type Rentable area (sqm) Price (EUR) Price (EUR/sqm) Location Buyer

Apartment 11,232 5,144,211,573 457,996 New York, US Blackstone JV Ivanhoe Cambridge

Office 212,280 2,080,492,500 9,801 New York, US SL Green

Office 32,091 1,465,363,748 45,663 Hong Kong Evergrande RE Group

Office 101,000 961,416,958 9,519 Sydney, AU

Office 70,261 939,125,643 13,366 Shanghai, CN The Link REIT

Office 79,894 878,454,927 10,995 Singapore, SG OUE

Office 99,142 852,364,575 8,597 San Francisco, US JP Morgan Asset Management

Office 56,500 842,312,225 14,908 Shanghai, CN Lee Kum Kee JV China Vanke

Hotel 503 824,322,027 1,638,811 Hong Kong, CN Gaw Capital JV Pioneer Global

Retail 69,126 782,897,350 11,326 Taipei, TW Fubon Financial

Population (2015) 7,349,472,000 ➚

Population: forecast (2050) 32.32% ➙

GDP growth (2015) 3.1% ➙

GDP: forecast (2016) 3.6% ➙

Inflation, end of period consumer prices (2015) 3.6% ➚

Trade volume of goods and services (2015) 3.2% ➚

Unemployment rate (2014) 8% ➙

Employment in services (2011) 43.8% ➙

Employment in agriculture (2011) 34.1% ➙

Employment in industries (2011) 22.1% ➙

Price of gold (y-o-y) * 976.91 EUR (– 0.12%)

Price of platinum (y-o-y) * 820 EUR (–18%)

Price of oil (Brent, y-o-y) * 34.6 EUR (–28%)

Price of oil (WTI, y-o-y) * 34 EUR (–23%)

Price of cotton (y-o-y) * 0.58 EUR (+16%)

Exchange rate USD/EUR * 0.9209 (+11%)

Exchange rate USD/YEN * 120.62 (+1%)

Exchange rate USD/CHF * 1.0015 (+1%)

Dow Jones Global Index (y-o-y) * 308 (– 4%)

MSCI World Index (y-o-y) * 1.705 (+3%)

* As at 31st December 2015

Large volumes of new office accommodation swiftly absorbed

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� S&P Global Property (real estate equity)� IPD Global Property Index (direct investment)


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According to the OECD, the economic output in the euro-zone is likely to grow by 1.8% in 2016 and by 1.9% percent in 2017, and would thereby outperform the past four years.While negative inflation was registered in the eurozone as recently as early 2015, the inflation rate had stabilised at 0.2% by the end of the year. On the strength of this status quo, the ECB decided to leave its key lending rate at an all-time low of 0.05%. Having taken another dive against the dollar in late Novem-ber, the single currency recovered in early 2016 and has levelled out at an exchange rate of 1.10 since.Germany in its role as Europe’s economic powerhouse in-creased its GDP by 1.5%, and the country’s growth pros-pects remain above-average. Another country that entered a boom cycle was Spain (with a GDP growth of 3.1% in 2015).

Economic growth closing in on potential output growth

Western Europe

Office: total return

Consistently high demand in London

The Euro has stabilised

Office: prime rents (Q1 2010 = 100)

LondonParisOslo

StockholmFrankfurt

ViennaAmsterdam

Population GDP per capita Office: prime rent Retail: prime rent Prime yield W&P rating(in 1,000) (EUR) (EUR) (local curr.) (EUR) (local curr.) (office) (1.0–5.0)

7,775 67,795 1,814 1,335 GBP ➚ 20,379 15,000 GBP ➙ 3.30% ➘ 1.0 ➙

2,186 65,500 750 750 EUR ➙ 13,250 13,250 EUR ➘ 3.75% ➘ 1.4 ➙

583 71,905 452 4,350 NOK ➘ 2,806 27,000 NOK ➚ 4.25% ➘ 1.8 ➙

826 66,148 567 5,200 SEK ➚ 1,624 14,900 SEK ➙ 4.00% ➘ 1.8 ➙

659 73,255 454 454 EUR ➚ 3,700 3,700 EUR ➚ 4.40% ➘ 1.8 ➚

1,698 56,499 310 310 EUR ➙ 3,700 3,700 EUR ➘ 4.40% ➘ 1.8 ➚

756 50,429 360 360 EUR ➙ 2,900 2,900 EUR ➚ 5.25% ➘ 1.9 ➙

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� United Kingdom� Sweden� France� Denmark� Finland� Netherlands� Germany

Upturn in the Netherlands

Meanwhile, the favourable market environment in the UK has stabilised. While the demand for space is as strong as ever, and serves as driving force behind property develop-ment projects, the supply shortage persists. This aggres-sive environment is speeding up rental growth and yield contraction in Class A and Class B cities.The persistent global jitters and the robust economic envi-ronment in Germany have attracted domestic and interna-tional investors to the country’s real estate market. Yields continue to harden while rents keep rising in response to the sustained keen demand, applies to both Class A and Class B locations. The vacancy rate continued to decline throughout 2015 and hit a year-end level not seen since 2001. As a result market values have gone up, and yield rates down. The economic environment in the Netherlands has im-proved as well. Companies have regained their confidence and are expanding their footprint. The focus is on economi-cally influential cities. There is reason to expect vacancies and yields to keep deteriorating.

SwedenUnited Kingdom

FinlandDenmarkGermany

NetherlandsFrance

Population Population growth GDP per capita GDP growth W&P rating Infrastructure Economic Freedom(in 1,000) (USD) (USD) (1.0–5.0) (1.0–5.0) (1.0–5.0)

9,879 0.92% 48,966 2.75% 1.2 ➙ 1.9 ➘ 2.2 ➙

64,938 0.79% 44,118 2.52% 1.2 ➙ 1.5 ➚ 1.9 ➚

5,472 0.45% 42,159 0.40% 1.3 ➘ 2.0 ➘ 2.2 ➙

5,660 0.48% 51,424 1.58% 1.3 ➙ 1.9 ➘ 2.0 ➙

81,687 -0.08% 41,267 1.51% 1.4 ➙ 1.5 ➙ 2.0 ➚

16,935 0.42% 44,333 1.80% 1.4 ➚ 1.3 ➙ 2.0 ➚

64,213 0.48% 37,728 1.16% 1.7 ➙ 1.5 ➙ 2.9 ➚

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� London� Stockholm� Vienna� Oslo� Amsterdam� Paris� Frankfurt


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Poland as growth engine

Eastern / South-Eastern Europe

Massive international demand in Poland

MoscowPrague

WarsawBudapest

IstanbulBucharest

Zagreb



As a result of the recovery in Western Europe and the low energy prices, Eastern European economies have embarked on a growth trajectory – and this despite the strained situ-ation in Russia.Poland is likely to grow at 3.5% in 2016, Hungary at 2.4%. The boom that the Czech Republic experienced in 2015 will probably loose some of its momentum in 2016 (the growth forecast being 2.6%). Growth in South-Eastern Europe is lagging slightly behind that of Eastern Europe.The real economic output of Russia has dropped by 3.8% in 2015 as a result of international sanctions. While there is reason to expect the economic situation to improve in 2016, the low oil price will continue to challenge the growth outlook. Other challenges include an inflation rate of more than 15% in the wake of the rouble’s depreciation and the restrictive trade policy.Similarly, Turkey’s inflation rate clearly exceeds the 5% target set by its central bank. Yet the Turkish economy is expected to grow by more than 3% each in 2015 and 2016.

Recession in Russia

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� Eastern Europe� Poland� Czech Republic

The drop in Russian investments was not as grave as the macro-economic development in general. The robust trade volume on Moscow’s office markets should primarily be at-tributed to opportunistic investors seeking to exploit the current pressure on prices.The sustained buoyant sentiment on Prague’s real estate market carried over into the second semester of 2015. While prime rents showed no major chances, the vacancy rate continued its descent.As in previous years, investors focus remained on Poland as commitments achieved their highest level in a decade, with retail property deals accounting for the bulk of the transac-tions. The sustained inflow of European and overseas capi-tal will ensure that trading continues at its brisk current pace in 2016.Meanwhile, the persistent political uncertainties in Turkey are making investors nervous. The vacancy rate perked back up in the course of the year, which is mainly explained by the increase in floor space on the market. Prime rents on Istanbul’s real estate market as a whole registered a lat-eral trend in 2015.

Russia hard-hit by sinking oil prices

PolandCzech Republic

HungarySlovak Republic

BulgariaTurkeyRussia

Population GDP per capita Office: prime rent Retail: prime rent Prime yield W&P rating(in 1,000) (EUR) (EUR) (local curr.) (EUR) (local curr.) (office) (1.0–5.0)

10,544 19,431 828 900 USD ➘ 3,681 4,000 USD ➘ 10.50% ➘ 2.5 ➙

1,249 29,784 234 234 EUR ➙ 2,280 2,280 EUR ➙ 5.60% ➘ 2.4 ➚

1,710 26,879 280 280 EUR ➘ 1,050 1,050 EUR ➚ 6.00% ➘ 2.4 ➚

1,712 21,416 252 252 EUR ➙ 1,140 1,140 EUR ➙ 7.25% ➙ 2.5 ➚

12,176 14,914 480 480 EUR ➙ 3,330 3,330 EUR ➚ 6.65% ➘ 2.6 ➙

326 9,548 220 220 EUR ➘ 540 540 EUR ➙ 7.50% ➘ 2.9 ➚

789 23,546 180 180 EUR ➙ 840 840 EUR ➙ 8.25% ➘ 3.2 ➚

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� Moscow� Warsaw� Budapest� Bucharest� Prague� Zagreb� Istanbul


38,006 -0.04% 12,662 3.53% 2.1 ➙ 2.9 ➚ 2.4 ➚

10,529 0.33% 17,330 3.91% 2.2 ➙ 2.6 ➘ 2.1 ➚

9,857 -0.26% 12,021 3.00% 2.3 ➙ 2.8 ➘ 2.6 ➙

5,424 0.08% 15,893 3.16% 2.3 ➚ 2.9 ➚ 2.6 ➙

7,166 -0.80% 6,582 1.70% 2.8 ➙ 3.2 ➚ 2.7 ➘

77,738 1.29% 9,290 3.04% 2.9 ➘ 2.8 ➘ 2.9 ➙

146,300 0.30% 8,447 -3.83% 3.0 ➘ 2.5 ➚ 3.8 ➘


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The US economy is on a stable growth path, and the econo-my is likely to grow at roughly 2.5% annually between 2014 and 2017. Since its peak in the wake of the financial cri-sis, US unemployment rate has been cut in half. Nonethe-less, there are some worries about the recent decline in ISM Manufacturing index.With a view to the stable growth prospects, the Fed recent-ly raised the key interest rate from its near-zero threshold. At the same time, the Fed announced further interest hikes going forward. The US dollar has appreciated vis-à-vis most other currencies lately.Canada’s economy has been impacted by deteriorating commodity prices, and growth has been sluggish as a re-sult. Over the past two years, the Canadian dollar has lost 15% against the US dollar. Then again, the weakness of the “loonie” has boosted exports and with it the outlook for the year 2016 (with 2% growth predicted).The favourable economic development in the United States has once again expanded into the local real estate sector.Asking rents in New York City, are going up at a modest pace, whereas vacancy rates are going down. The positive trend was supported by the creation of a technology hub which meant more diversity and less dependence on the finance industry.

Fed raises key lending rate

North America

Canada’s economy rebounds

Continued growth in the US as rising rents coincide

with declining vacancy rates

With a market share of more than 40%, the Federal Govern-ment generated much of the office demand in downtown Washington D.C. While the CBD market was characterised by a robust demand for office space by government agencies and law firms, major tenant deals were also reported from non-core sub-markets.San Francisco ended the year with a strong performance. The fastest rent growth was reported for Class A (+12%) and Class B (+20%) assets. In fact, rents of more than $60.00/sq ft put San Francisco in second place after New York City. The growth is expected to continue in 2016, if at a slightly slow-er pace, because the willingness to invest and the commit-ment to the region on the part of technology firms remains as high as ever.Forecasts for the Canadian real estate sector predict sub-stantial demand that is boosted by the weak Canadian currency and solid real estate values. The search for high returns will lead real estate market players in Canada to expand even further from core into non-core assets. This makes it safe to expect higher prices and deteriorating yields for prime assets.



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� USA� Canada

New YorkChicago

WashingtonToronto

HoustonAtlanta

Montreal

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� Chicago� Washington� Toronto� Atlanta� Montreal� New York� Houston

United StatesCanada


321,410 0.79% 55,904 2.57% 1.2 ➘ 1.7 ➙ 2.0 ➙

35,798 1.08% 43,935 1.04% 1.2 ➘ 1.8 ➙ 1.8 ➙

Population GDP per capita Office: prime rent Prime yield W&P rating(in 1,000) (EUR) (EUR) (local curr.) (office) (1.0–5.0)

8,364 67,763 828 900 USD ➚ 4.00% ➙ 1.1 ➘

2,853 56,854 410 445 USD ➚ 4.75% ➙ 1.7 ➙

592 70,476 572 622 USD ➘ 4.50% ➙ 1.8 ➘

2,503 47,826 392 590 CAD ➙ 4.50% ➙ 1.8 ➙

2,242 59,578 384 417 USD ➙ 5.50% ➙ 1.9 ➙

538 48,390 257 279 USD ➚ 5.50% ➘ 2.0 ➘

1,621 39,654 289 435 CAD ➘ 5.00% ➙ 2.0 ➙


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Latin America

Office: cap rates


The situation in Brazil is marked by a weak macro-economic environment, a steep drop in GDP, and a hike in key interest rate in order to counter the depreciation of the Real.In Argentina, the Peso depreciated by 30% against the dol-lar shortly after the new president took office.The economic output of Venezuela has taken a nosedive.By contrast, Chile’s economic output is likely to grow by more than 2.5% in 2016.Mexico has consistently rolled back its dependence on oil production. The diversification efforts are paying off with the current low energy prices, and Mexico’s economy could realise a growth of more than 3% in 2016.

Full-blown recession in Brazil

Diminishing returns in Chile

Brazil becoming more attractive for overseas investors

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Mexico reduces its dependence on the oil price

The flagging economic output of Brazil encourages domes-tic buyers to take a less aggressive approach, which in turn raises the appeal of the Brazilian real estate market for global investors. Their focus, however, is more or less limited to the property markets of São Paulo and Rio de Janeiro.A well-filled pipeline with new property development pro-jects and slow demand for office accommodation has driv-en the vacancy rate in Brazil’s business metropolis beyond the 20% mark. Rents declined by 6% during the same pe-riod of time.Mexico City, which is the country’s economic powerhouse, benefits directly from the boom cycle in the United States. The positive ramifications for the real estate market are readily apparent, as Mexico City’s office market is register-ing consistent and robust tenant demand.In Chile, prime cap rates dropped from around 9% six years ago to less than 7% by the end of 2015. While the investor focus used to be on speculative property developments in years past, it could soon shift back to stable, reliably in-come-producing property assets. This development will keep up the pressure on cap rates.

Mexico CitySantiago

São PauloLima

Rio de JaneiroBuenos AiresPanama City

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ChileMexico

PeruColombiaUruguay

Costa RicaBrazil


18,006 1.09% 13,331 2.27% 2.3 ➘ 2.7 ➘ 1.8 ➙

121,087 1.23% 9,592 2.31% 2.7 ➘ 3.0 ➙ 2.7 ➙

31,911 1.55% 5,638 2.40% 2.9 ➘ 3.6 ➙ 2.5 ➚

48,209 1.17% 5,687 2.50% 3.1 ➘ 3.4 ➚ 2.3 ➙

3,416 0.34% 16,092 2.50% 3.1 ➘ 2.8 ➚ 2.4 ➚

4,837 1.36% 10,672 3.00% 3.1 ➚ 3.1 ➚ 2.5 ➚

204,451 0.96% 8,802 -3.03% 3.3 ➘ 3.2 ➚ 3.3 ➚


8,842 19,396 350 380 USD ➘ 7.50% ➘ 2.5 ➚

5,197 12,484 227 247 USD ➘ 8.00% ➙ 2.6 ➙

11,038 13,946 296 1,272 BRL ➘ 9.00% ➚ 2.9 ➘

8,000 6,017 246 267 USD ➘ 10.65% ➙ 3.0 ➚

6,187 11,589 332 1,430 BRL ➘ 10.50% ➚ 3.2 ➘

3,043 13,712 314 341 USD ➚ 7.25% ➙ 3.4 ➘

825 6,957 254 276 USD ➘ 9.00% ➙ 3.4 ➚


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Asia

Office: total returnChina’s economic growth for 2016 is still at a high level of 6.5%, but it is the lowest annual growth rate since the turn of this century. The decline is explained by a downturn in exports, increased debt, and slowing investments.In the wake of the Chinese stock market crash in summer of 2015, the Shanghai Composite Stock Market Index kept slipping on the first trading days of 2016.The Bank of Japan has further expanded its quantitative eas-ing policy, and charges negative interest on certain deposits. Japan’s economy is expected to grow by about 1%.South Korea is feeling the slowing demand from China as much as the Japanese economy. An OECD estimate pre-dicts an economic growth of 3.1% for 2016.India is the only one of the four BRIC countries that has managed to maintain its growth pace. The economic growth is estimated to remain stable at 7.0-7.5% during the years 2014-2017.

Negative interest in Japan as well

China’s previously sky-high growth rates drop

Tokyo’s office market unwaveringly strong

Another massive rent hike in Hong Kong

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In Tokyo, the office market continues the positive perfor-mance of last year. The increase in average Grade A rents began to level out during the second half of the year (+2.8%), eventually delivering a year-end growth of +7.6% YoY.With a take-up volume of 1 million sqm, Shanghai reaf-firmed its leading position in the Asia-Pacific region. Driven by keen demand from the financial sector, rents surged by +10% in 2015.In the Asian region, Hong Kong remained the unrivalled rental growth leader with a rent hike of +13%.The weaker economic evidence presented by the South Ko-rean economy led to a negative net absorption in the office market. Rents remained stable year on year after a rental growth of less than 1%.Despite the unchecked demand from the IT sector, rents in Mumbai experienced another decline by -2.4%.


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� Hong Kong� Shanghai� Singapore� Mumbai� Seoul� Tokyo� Kuala Lumpur

SingaporeJapan

South KoreaMalaysia

Taiwan Province of ChinaChinaIndia


5,523 2.34% 53,224 2.20% 1.0 ➙ 1.2 ➚ 1.1 ➘

126,729 -0.12% 32,481 0.59% 1.8 ➘ 1.4 ➙ 2.1 ➚

50,629 0.51% 27,513 2.66% 1.8 ➚ 1.7 ➚ 2.2 ➚

31,120 1.74% 10,073 4.70% 2.1 ➘ 2.0 ➘ 2.2 ➚

23,494 0.29% 22,083 2.24% 2.3 ➙ 1.7 ➚ 2.0 ➙

1,374,957 0.50% 8,280 6.81% 2.7 ➘ 2.6 ➚ 3.7 ➙

1,292,707 1.52% 1,688 7.26% 3.4 ➘ 3.4 ➙ 3.4 ➚

Hong KongSingapore

TokyoSeoul

ShanghaiKuala Lumpur

Mumbai


7,055 20,719 1,662 14000 HKD ➚ 2.50% ➙ 1.4 ➙

3,734 31,511 976 1501.5 SGD ➘ 4.00% ➙ 1.6 ➘

12,907 39,937 994 130000 JPY ➚ 3.10% ➘ 1.8 ➘

10,464 17,543 246 314860 KRW ➘ 4.70% ➙ 2.1 ➚

18,885 7,253 536 3780 CNY ➚ 5.60% ➘ 2.5 ➘

1,475 13,875 211 988.8 MYR ➘ 6.00% ➙ 2.5 ➚

13,831 3,444 411 29580 INR ➚ 10.00% ➚ 3.0 ➚


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Australia/New Zealand


For Australia’s economy, the decline in the commodity sector is offset by an increase in consumption and invest-ments. Exports have benefited from a currency deprecia-tion. The OECD forecast for 2016 projects an economic growth by 2.6%.Investments in Australian housing construction were ex-ceptionally high in 2014 and 2015, and are likely to stabi-lise on an elevated level in 2016.Economic growth in New Zealand is slowing, and will prob-ably remain just below 2% in 2016. Regressive food prices have diminished earnings in the agricultural sector. Moreo-ver, the brisk growth in the building sector these past two years is likely to slow down. In December 2015, the Re-serve Bank of New Zealand lowered the key lending rate to 2.5%.

High building investments in Australia

Sydney confirms its lead role on Australia’s real estate market

Total return: office

Key interest rate cut in New Zealand

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Light at the end of the tunnel for Perth real estate market?

Credit for the improved net absorption in Australia goes mainly to Melbourne and Sydney, whereas the country’s other cities maintained their prior-year level.In Sydney, the combined appetite of foreign (55%) and do-mestic investors generated the highest investment volume seen in more than a decade. This resulted in a square-me-tre price hike by more than 10% YoY, and has renewed the pressure on yields. Rents between $600 and $900 per square metre, already the highest in the country, rose by another +4% in 2015.The dip in commodity prices has heavily impacted the real estate sector in Perth. In addition to high vacancy rates, the market is struggling with another cut in Grade A rents by almost 20%. The situation is compounded by hefty incen-tives granted to tenants signing new leases. The anticipated population increase by +2.5% is likely to ease the pressure on the real estate industry even though there are additional real estate projects in the pipeline.In 2015 office space requirements in Auckland’s CBD were as high as ever. They have caused vacancy rates to drop to the lower single-digit range while ensuring moderate up-ward growth for prime rents.

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New ZealandAustralia


4,615 1.05% 36,963 2.22% 1.1 ➘ 2.2 ➚ 1.5 ➙

24,027 1.69% 51,642 2.37% 1.2 ➘ 1.8 ➚ 1.6 ➙

SydneyMelbourne

AucklandBrisbane

PerthAdelaide


3,750 53,355 604 900 AUD ➚ 5.50% ➘ 1.7 ➘

3,552 50,008 391 583 AUD ➚ 7.25% ➚ 2.1 ➘

405 41,860 340 540 NZD ➚ 6.90% ➘ 2.1 ➙

1,826 45,951 439 654 AUD ➙ 6.75% ➙ 2.2 ➘

1,318 45,354 470 700 AUD ➘ 8.50% ➙ 2.2 ➘

1,065 47,250 295 440 AUD ➙ 8.00% ➙ 2.3 ➙


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Africa/Middle East

Following the successful fight against the Ebola virus, Afri-ca’s economic performance should gather momentum and, according to the African Development Bank Group is ex-pected to increase by 5%. However, there are substantial regional discrepancies.Economic growth in South Africa is still below average, and will probably be limited to 1.5% in 2016. The substantial de-preciation of the South African Rand prompted the Bank of South Africa to raise the key lending rate by half a percent-age point. Building expenditures have lately rebounded in Cape Town.For Saudi-Arabia, the collapse of the oil is expected to pre-cipitate a budget deficit of nearly 100 billion dollars for 2015. As it were, many countries in the Middle East will have to downscale government consumption. Israel’s business cycle is paced by a robust internal con-sumption, a low lending rate of 0.1%, and a strong curren-cy. According to an OECD estimate its economy will grow by 3.2% in 2016.

Africa maintains growth trajectory

Large budget deficit in Saudi-Arabia

Total return: office

Cape Town unable to match the pace of Johannesburg

Despite the drop in oil prices, rents in prime locations in the UAE are rallying

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Despite persistent economic issues in South Africa, prime office rents perked up both in Johannesburg and Cape Town. Johannesburg started off into 2015 with a surge in prime rents that levelled out toward the end of the year, achieving an annual growth of 2.2% compared to 2014. It was matched by a drop in vacancies from 4.6% (Q4 2014) down to 3.9% (Q4 2015) for prime office space and from 11.3% (Q4 2014) to 8.4% (Q4 2015) for Grade A buildings. The office market in Cape Town, while unable to keep up with the growth in Johannesburg, also saw prime rents in prime office buildings perk up (+0.8%) and vacancy rates plummet from 18.8% (Q4 2014) to 1.3% (Q4 2015).The momentum built up during the first semester was car-ried forward into the second half of the year, especially be-cause of the limited supply of available Grade A accommo-dation. The office market in Cairo outperformed all other cities in the MENA region, although Dubai and Abu Dhabi al-so reported a sustained stable demand. In terms of vacan-cy reduction and rent growth, Dubai took the lead here. In 2015, Grade A rents registered a +4% growth in Dubai, and grew by +7% in Abu Dhabi. The well-filled pipeline of new office accommodation makes it reasonable to assume that the vacancy rate in Dubai’s CBD will show a lateral trend approximating 19%.

United Arab EmiratesSaudi Arabia

IsraelSouth Africa

Population Population growth GDP per capita GDP growth W&P rating Infrastructure Economic Freedom(in 1,000) (EUR) (1.0–5.0) (1.0–5.0) (1.0–5.0)

9,581 5.55% 35,392 3.00% 1.7 ➙ 1.3 ➘ 2.2 ➙

31,386 2.91% 20,139 3.43% 2.4 ➘ 2.3 ➘ 2.9 ➚

8,371 1.94% 35,702 2.54% 2.4 ➘ 2.4 ➚ 2.3 ➚

54,860 1.51% 5,784 1.40% 2.6 ➘ 3.1 ➘ 2.9 ➙


100

75

125

200

150

175

2015201420132010 20122011

� Tel Aviv� Johannesburg� Abu Dhabi� Dubai

DubaiAbu Dhabi

JohannesburgTel Aviv


2,501 51,729 501 2000 AED ➙ 8.75% ➘ 2.0 ➚

860 53,550 476 1900 AFD ➙ 8.75% ➘ 2.2 ➚

3,790 15,348 148 2500 ZAR ➙ 8.25% ➚ 2.8 ➘

393 33,246 309 1308 ILS ➚ 7.00% ➘ 2.8 ➙


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Wüest & Partner produces a city rating for 401 cities world-wide. In addition, a separate country rating is also provided as an integral part of this study. These ratings reflect the structural risk of a location for real estate investment. The analysed data reflected in the rating targets both na-tional and local perspectives, thereby including key indica-tors of country-level business conditions and risks as well as indicators important for the local real estate market. Data sources for the data are international organisations, nation-al statistics, broker reports as well as our own resources.With this structure it is not surprising that the best-rated locations are found in the rich and very stable countries of Western- and Northern-Europe as well as in North America and the major Asian economies. The map on the previous page shows the evaluated cities and countries ranked on scale from “Excellent” to “Lowest”. It should be noted that the overall rating of individual cit-ies and countries is a result of the relative position within the respective dataset. It is therefore possible that the rat-ing of a country may differ from the rating of the individual cities therein. For example, France has the rating “Good” where as Paris, its only rated city, has the rating “Excellent” being one of the most important markets worldwide. The other way round we can observe for example in South Af-rica which as an investment country gets the result “Good”, but no city could be classified better than “Questionable”.

Rating as risk measurement for institutional investors

Rating of real estate metropoles worldwide

Country rating 30%

Real estate market 30%

Demography city 14%

Economy city 10%

Infrastructure 6%

Fundamental risks 5%

Accessibility 5%

Total 100%

Business conditions 21%

State and social environment 18%

Transparency 17%

Economy 15%

Risk ratings 15%

Interest rates and credit 8%

Demography 6%

Total 100%

Country rating: weighting

Metropole rating: weighting

Wüest & Partner will publish factsheets providing general and real estate information for each rated location. This tool aims to help international investors to optimise their asset allocation from a risk and return perspective. Further-more, it provides users with the possibility of analysing ex-treme scenarios. For example, if London were to loose its status as a major financial centre.


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ExcellentGoodQuestionablePoorLowestNot rated

Rating of real estate metropoles worldwide


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This market survey is based on a broad internal data pool. It also draws on data provided by the following internation-al institutions: various statistical offices, International Mon-etary Fund (IMF), International Labour Organisation, Or-ganisation for Economic Co-operation and Development (OECD), United Nations Organisation, World Bank Group; newspapers: Economist, «finance.net», Wallstreet Online; as well as market reports of the following brokers: CB Rich-ard Ellis, Cushman & Wakefield, Jones Lang LaSalle, Knight Frank, NAI Apollo, PriceWaterhouseCoopers Real Capital Analytics. All total return data is supplied by IPD.

Grading system (W&P Rating, JLL Transparency Index and World Bank Ease of Registering Property): Grade 1.0 = ex-cellent, Grade 5.0 = deficient. Prime rents (2015): EUR per square metre and year, local currency per square metre and year. Prime yields (2015): net initial yield (cash flow before capex/price).GDP figures are for the year 2015 (IMF). Population figures cover the last eight available years (IMF).Arrows indicate the year-on-year change (throughout the whole document).

This market report was compiled by Wüest & Partner AG and has been prepared with due care. It is intended for gen-eral guidance only. The market report is based upon data in our possession or supplied to us. We believe this infor-mation to be correct and accurate, but cannot provide any guarantee. Reliance should not be placed upon the informa-tion, forecasts and opinions set out herein for any purpose whatsoever, and Wüest & Partner AG accepts no liability, whether in negligence or otherwise, arising from such use.

Wüest & Partner is an internationally active consultancy firm for real estate. It focuses on the property and construc-tion sectors, urban development and locational trends. Its multidisciplinary team counsels institutional owners, banks and insurers, construction and real estate companies, pub-lic authorities and private clients.With a comprehensive range of services, innovative prod-ucts and unrivalled databases, the company develops and, in many cases, helps to implement tailored solutions.Since its foundation in 1985, Wüest & Partner has – not least by virtue of its independence – established an impec-cable reputation for quality. By concentrating exclusively on consultancy services, it can deliver fully professional and at the same time neutral solutions. Staffed with approximately 130 specialists from a variety of fields – including architecture, economics, IT, engineering, natural and social sciences – the company has an excellent multidisciplinary knowledge base on which to build. It also has an unrivalled real estate pool of data on all re-gions and market segments, enabling it to provide in-depth consultancy throughout Switzerland and furnish informa-tion to make the real estate markets more transparent. For specific projects, Wüest & Partner’s team, based in Zurich, in Geneva, in Frankfurt in Berlin and in Berne can rely on support from a network of international business partners and local experts.Wüest & Partner AG is owned and managed by 17 partners, who vouch for the continuity, independence, and sustain-able performance of the company. They are Martin Hofer, Andreas Ammann, Marcel Scherrer, Marco Feusi, Andre-as Bleisch, Jan Bärthel, Nabil Aziz, Patrick Schnorf, Mario Grubenmann, Patrik Schmid, Gino Fiorentin, Stefan Meier, Hervé Froidevaux, Ronny Haase, Pascal Marazzi-de Lima, Andreas Keller and Karsten Jungk.

Sources

Notes

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