global property market 2018 outlook - real estate …...2017/11/23 · 2018 outlook november 28,...

CONFIDENTIAL | FOR INTENDED RECIPIENTS ONLY & NOT FOR PUBLIC DISTRIBUTION

Global Property Market 2018 Outlook November 28, 2017

Jacques Gordon, Global Strategist

LaSalle Investment Management | Global Intro ISA 2018 2

Outlook for 2018

01 GLOBAL THEMES

02 NORTH AMERICA

03 EUROPE

04 ASIA PACIFIC

05 PREDICTIONS


SUSTAINABLE FOR NOW…

A macro-economic bedtime story

Goldilocks (just right 2017-18)

Honey Bear

Steady Global Growth

Grizzly Bear

Capital Markets Alive and Healthy

RE Fundamentals Well-Balanced

Polar Bear

Three Bears

GeopoliticalTension

Monetary PolicyErrors

Fiscal Policy Over-Stimulus


GDP Forecasters Believe in Goldilocks

0%

1%

2%

3%

4%

5%

6%

7%C

hina

Sou

th K

orea

Aus

tralia

Mex

ico

U.K

.

Ger

man

y

U.S

.

Can

ada

Fran

ce

Japa

n

Wor

ld

GD

P G

row

th

GDP Growth Forecasts

2017 Forecast 2018 Forecast 2019 Forecast

Source: Bloomberg Survey of Forecasters.Latest data as of 27 November 2017

MOST HEALTHY GLOBAL OUTLOOK SINCE 2004


0

20

40

60

80

100

120

140

160

180

200

220

240

Global REIT(DevelopedCountries)

Global Equity Global FixedIncome

Global GDPGrowth

Global CPI Growth US VIX Global GeopolitcalRisk Index

Inde

x (Q

1 20

08 =

100)

Current* As of Q1 2008

Financial asset prices above Q1 2008 levels

Economic fundamentals below Q1 2008 levels

TURBULENCE DID NOT SHOW UP IN THE CAPITAL MARKETS

Macro Conditions Today versus Just Before the GFC

Note: * Current is as of 25th October 2017 except for Geopolitical risk index which is as of 11th October 2017The above analysis is based on the following total return indexes: Global equity- MSCI ACWI (All Country World Index), Global fixed income – Barclays Global Aggregate Index, Developed REITs – FTSE/NAREIT Developed Countries Index, Global consumer price growth, Global GDP growth, the US stock market volatility (VIX) index and Geopolitical risk index.Source: Global equity, Global fixed income, Listed REIT, and the US volatility index data is sourced from Bloomberg, as of 25th October 2017; Global consumer price growth and GDP growth data is sourced from Oxford Economics, as of 25th October 2017; Geopolitical risk index is sourced from Economic Policy Uncertainty, as of 11th October 2017

Geopolitical risks above Q1 2008 levels

Stock market volatility

below Q1 2008 levels


PREPARE FOR TURBULENCE…. AND KEEP ON PREPARING

Macro scenarios for 2018-2020

Scenario Odds Global Growth

Core Pricing Fundamentals

Goldilocks 50% 3 - 3.75% Steady and Positive

Geopolitical Risks 20% 2.5 - 3% Local Negative

Financial Risks 20% 2 - 2.5% Down Broadly

Hyper-Stimulus 10% 4%+ Volatile/Bubble Supply Risk

Wild Card Triggers

Geopolitical Monetary-Financial System Fiscal Hyper-Stimulus

KoreasMiddle East

RussiaFailed States

Rising Debt Levels QE Withdrawal Tremors

USChina


Government Bond Yields Drifting Slowly Upwards

Yield Curve Implied 10-Year Rate in 2027

CountryBased on

Yield Curve10/23/16

Based onYield Curve

11/23/17

Change(bps)

Australia 3.79 3.75 -4

U.K. 2.38 2.42 +4

U.S. 3.02 3.06 +4

Canada 2.55 2.62 +7

Japan 0.88 1.13 +25

France 1.66 2.16 +50

Germany 1.01 1.65 +64

Mexico 7.57 8.28 +71

South Korea 1.73 2.51 +78

China 3.68 4.56 +87

Source: Bloomberg.Data as of 23 November 2017.

10Y Government Bonds

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Dec

-14

Feb-

15A

pr-1

5Ju

n-15

Aug

-15

Oct

-15

Dec

-15

Feb-

16A

pr-1

6Ju

n-16

Aug

-16

Oct

-16

Dec

-16

Feb-

17A

pr-1

7Ju

n-17

Aug

-17

Oct

-17

10 Y

ear Y

ield

s, %

US: 2.32% Germany: 0.35% UK: 1.25% Japan: 0.03%


UNLEVERAGED RETURNS BY ASSET CLASS AND COUNTRY THROUGH Q3 2017*

Real Estate’s Relative Performance

*All data through Q3 2017, except in in Japan, where data is through June 2017 and a forecast is used for Q3.**This standard deviation is based on quarterly returns over the last 20 years, then annualized (except in the case of Japan, where they are based on returns since inception). Note that appraisal smoothing contributes to the lower volatility of direct real estate indices.Notes on Sources1 MSCI All Country Gross World Total Return Index in Local Currency.2 EPRA/NAREIT Global (Developed) Index Total Return in US Dollars. Ticker: RUGL. No local currency EPRA index available.3 Citigroup World Corporate Bond Index Total Return in US Dollars (Local Currency History Not Available Prior to 1999).4 Citigroup World Government Bond Index All Maturities Total Returns in Local Currency.5 US NCREIF Property Index Total Returns in US Dollars.6 UK Investment Property Databank (IPD) Quarterly Standing Property Total Returns in British Pounds, data prior to Dec 2001 is IPD Annual. UK IPD Quarterly Index used in all time periods available.7 Canada Investment Property Databank (IPD) Quarterly Standing Property Total Returns in Canada Dollars.8 Australia Investment Property Databank (IPD) Quarterly Standing Property Total Returns in Australian Dollars.9 Japan Investment Property Databank (IPD) Quarterly (Based on monthly index) Standing Property Total Returns in Japanese Yen. Data to June 2017 with forecast for Q3 by LaSalle based on the Q2 return.

Updated Q3 2017.

TO Q3 2017

Average Annual Total

ReturnGlobal Stocks1

Global RE Securities2

Global Corporate

Bonds3

Global Gov’t

Bonds4

Canada Direct

Property (MSCI/IPD)7

1 Year 18.5% 1.5% 1.2% -2.3% 6.3%

3 Years 9.6% 6.8% 3.7% 2.6% 6.9%

5 Years 13.4% 7.6% 3.7% 2.9% 8.5%

10 Years 5.4% 2.6% 5.6% 3.9% 8.5%

20 Years 5.9% 7.1% 5.7% 4.2% 10.8%

Std. Dev. ** 16.5% 20.1% 4.2% 3.4% 3.6%


UNLEVERAGED RETURNS BY ASSET CLASS AND COUNTRY THROUGH Q3 2017*

Real Estate’s Relative Performance

*All data through Q3 2017, except in in Japan, where data is through June 2017 and a forecast is used for Q3.**This standard deviation is based on quarterly returns over the last 20 years, then annualized (except in the case of Japan, where they are based on returns since inception). Note that appraisal smoothing contributes to the lower volatility of direct real estate indices.Notes on Sources1 MSCI All Country Gross World Total Return Index in Local Currency.2 EPRA/NAREIT Global (Developed) Index Total Return in US Dollars. Ticker: RUGL. No local currency EPRA index available.3 Citigroup World Corporate Bond Index Total Return in US Dollars (Local Currency History Not Available Prior to 1999).4 Citigroup World Government Bond Index All Maturities Total Returns in Local Currency.5 US NCREIF Property Index Total Returns in US Dollars.6 UK Investment Property Databank (IPD) Quarterly Standing Property Total Returns in British Pounds, data prior to Dec 2001 is IPD Annual. UK IPD Quarterly Index used in all time periods available.7 Canada Investment Property Databank (IPD) Quarterly Standing Property Total Returns in Canada Dollars.8 Australia Investment Property Databank (IPD) Quarterly Standing Property Total Returns in Australian Dollars.9 Japan Investment Property Databank (IPD) Quarterly (Based on monthly index) Standing Property Total Returns in Japanese Yen. Data to June 2017 with forecast for Q3 by LaSalle based on the Q2 return.

Updated Q3 2017.

TO Q3 2017

Average Annual Total

ReturnGlobal Stocks1

Global RE Securities2

Global Corporate

Bonds3

Global Gov’t

Bonds4

US Direct Property

(NCREIF)5

UK Direct Property

(MSCI/IPD)6

Canada Direct


Australia Direct


Japan Direct Property

(IPD)9

1 Year 18.5% 1.5% 1.2% -2.3% 6.9% 9.5% 6.3% 12.0% 6.9%

3 Years 9.6% 6.8% 3.7% 2.6% 9.8% 9.3% 6.9% 12.3% 7.9%

5 Years 13.4% 7.6% 3.7% 2.9% 10.3% 10.6% 8.5% 11.3% 7.3%

10 Years 5.4% 2.6% 5.6% 3.9% 6.2% 4.5% 8.5% 8.4% 3.6%

20 Years 5.9% 7.1% 5.7% 4.2% 9.6% 8.6% 10.8% 10.5% -

Std. Dev. ** 16.5% 20.1% 4.2% 3.4% 6.2% 4.6% 3.6% 2.5% 2.6%


Take the long view on secular trends: DTU + E

Millennialgeneration

impact

Students,Immigrants,Refugees

Ageingpopulation,Longevity

Rise ofAsia-Pacific

Workplacesadapted

to deliver health,well-being and

productivity

Unrelentingurbanization

Planning regulations

allow density

Regenerationof fringelocations

Impact of Infrastructure

Evolving tenant expectations (amenities &walkability)

Climatechangeimpacts

Recycling,esp water

Energyefficiency

Portfolioperformance

metrics

Environmentalstandards/

certifications

Internet andE-commerce

Retail &logisticsImpact

InnovationDistricts

SharingEconomy

DataAnalytics and

Algorithms

SMARTbuildings


DEMOGRAPHICS FOR THE LONG TERM

D-Themes for 2018-2020

Impacts Relevant for Real Estate

AGING

Savings Surplus

Pre-Post Retirement Asset Mix

Longevity Impact

Asset Pools still Growing Through 2025*

Shift from Growth to Income-earning

Impact on Pension Funding Ratios


DEMOGRAPHICS FOR THE LONG TERM

D-Themes for 2018-2020

* Varies by country

Impacts Relevant for Real Estate

AGING

Savings Surplus

Pre-Post Retirement Asset Mix

Longevity Impact

Asset Pools still Growing Through 2025*

Shift from Growth to Income-earning

Impact on Pension Funding Ratios

HUMAN CAPITAL

Highly Educated Workforce

Labor Shortages

Left Behind

Location-Lifestyle Preferences

Workplace & Amenities Matter

Affordability, Populist Political Trends

MIGRATION - MOBILITY

Rising Affordability of Travel

Border Controls

Ethinicity-Gender

Air Carriers, Hotels, Airbnb, TripAdvisor

Treaty vs Skill-Driven

Education and Social/Income Mobility


TECHNOLOGY THEMES CONTINUE TO DOMINATE

T-themes for 2018-2020

E-COMMERCE-LOGISTICS-RETAILING

PROP TECH FIN TECH

Predictive Shipping

Customer Metrics

Brick & Mortar Reboot

Analytics and Algorithms

Data Scraping Micro-Areas

Leasing/Asset Management

Rise of the ETF

Rise of Capital Market Portals

Rise of Index-linked Investing

BlockChain for Real Estate


MANY NEW ENTRANTS

“Prop-Tech” innovation and tech tools: 2016


Expanding RE Tech Market Map: 2017

Data Aggregators

Technology Development

Productivity/Sales Tools

Online Transactions

Long Term Listings

Short Term Listings

Long & Short Term Listings

Property Management

Visualization Tools

Comps

Predictive CRE AnalyticsCoworking/Coworking Management Lease Administration


URBANISATION TRENDS

U-Themes for 2018-2020

DENSITY AND SUPPLY CONSTRAINTS

Planning Regimes More PermissiveStill Restrictive in Higher-Income SuburbsMixed Use and Walkability

CENTRAL-FRINGE-SUBURBAN NODES

Amenity Mapping Polycentric Cities: The “Ride-sharing” effectCongestion Pricing, Autonomous Vehicles

URBAN INFRASTRUCTURE

Competing for Residents and CompaniesSmart Cities (On-line and Broadband)Climate Change and Resilience


Sidewalk Lab’s Plan for Quayside, Toronto


Climatechange

Waterscarcity

Energyefficiency

Portfoliometrics

Environmentalstandards/

certifications

E-Factors, The Fourth Secular Trend


Research Findings from LaSalle Study

E-factors will drive long-term occupier & investor demand

Expected returns for green and non-green buildings will diverge

RESULTS VARY BY PROPERTY TYPE AND MARKET

A “green premium” can be captured by adding sustainability features to existing buildings

November 2017 CONFIDENTIAL | FOR INTENDED RECIPIENTS ONLY & NOT FOR PUBLIC DISTRIBUTION

North AmericaISA 2018 PREVIEW


NORTH AMERICAN GROWTH LEADING G7 IN 2017

Source: U.S. Bureau of Economic Analysis, Bank of Canada Oxford Economics, Economy.com. Data and Forecasts most recent as of November 2017.

Economic indicators steady and positive

• US and Canadian GDP growth is trending up in 2017. Moderate growth forecast to continue.

• A slowdown is forecast, but a recession is not on the horizon in either market.

1.7%

2.0%

2.5%

1.2%1.4%

3.0%

2.2%

1.6%1.8%

2.2%

1.7%

2.6%

2.9%

1.5%

2.3%

2.6%

1.8%

1.5%

0%

1%

2%

3%

4%

2012 2013 2014 2015 2016 2017(F) 2018(F) 2019(F) 2020(F)

% C

hang

e Y/

Y

Canada GDP US GDP

Forecast

Real Annual GDP Growth


US AND CANADA SIMILAR; YET SO DIFFERENT

North American outlook


Bank of Canada Overnight Rate Target & US Fed Funds Rate

Source: Bank of Canada, US Federal Reserve, Oxford Economics (forecast), LaSalle Investment Management. Data to 3Q 2017.

Bank of Canada and US Fed are raising rates

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Canada U.S.

Forecast


*Availability shown for warehouse and industrial; Source: CBRE-EA (Office and Industrial), MPF Research (US Apartments), CMHC (apartments), forecasts by LaSalle. Data and forecasts most recent available as of 3Q 2017. Note: Past performance is not indicative of future results. There is no guarantee that any trends shown herein will continue. The forecast shown is presented for illustrative purposes only and there is no guarantee it will materialize.

US vacancy rates show mixed story

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Vaca

ncy

Rat

e

US Office US Warehouse*

Forecast

LOGISTICS PROPERTIES EXPERIENCE RECORD DEMAND 2014-2016



Canada-US office vacancy rates, a mixed story

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%19

97

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Vaca

ncy

Rat

e

US Office Canada Office

Forecast

CANADA OFFICE FALLING FROM PEAK LEVELS



Availability Rates for Warehouse/Industrial

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%19

97

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Vaca

ncy

Rat

e

US Warehouse* Canada Industrial*

Forecast

CANADA EVEN TIGHTER THAN THE US



Multi-family Rental Residential: Demand Keeping up with Supply

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%19

97

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Vaca

ncy

Rat

e

US Office US Apartments Canada Apartments

Forecast

CANADA TIGHTER HERE TOO


SCENARIOS FOR HOW OFFICE MARKET AND OWNERSHIP MIGHT EVOLVE

Office: looking to the future

Source: Wall Street Journal, LaSalle

$ 20 BN

$ 2,000

2%

108%

Total Asset Value

Value per Square Foot

Cap Rate

Average AnnualGrowth Rate


SIMILAR DEMOGRAPHIC PROFILES CREATE OPPORTUNITIES AND CHALLENGES

North American demographics and real estate investment

*Source: Moody’s Economy.com,Statistics Canada (Table 051-0001 July 1 2017 estimates; Table 052-0005 Medium-growth forecast scenario, LaSalle Investment Management.

(1,000)

(500)

-

500

1,000

1,500

- 10 20 30 40 50 60 70 80 90 100 andOver

US

Pop

ulat

ion

Cha

nge

(000

's)

Age Cohort

Age Group Population Growth (2018-2028 US, 2017-2027 Canada)

US Population Change

25-62 year olds – Avg. Annual growth of 0.3% in the US could limit workforce growth and office space demand

55+ Avg. Annual growth of 1.6% in the US will drive Medical Office demand and age restricted apartment

demand


SIMILAR DEMOGRAPHIC PROFILES CREATE OPPORTUNITIES AND CHALLENGES

North American demographics and real estate investment

*Source: Moody’s Economy.com,Statistics Canada (Table 051-0001 July 1 2017 estimates; Table 052-0005 Medium-growth forecast scenario, LaSalle Investment Management.

(100.0)

(50.0)

-

50.0

100.0

150.0

(1,000)

(500)

-

500

1,000

1,500

- 10 20 30 40 50 60 70 80 90 100 andOver

Can

ada

Pop

ulat

ion

Cha

nge

(000

's)

US

Pop

ulat

ion

Cha

nge

(000

's)

Age Cohort

Age Group Population Growth (2018-2028 US, 2017-2027 Canada)

US Population Change Canada Population Change

25-62 year olds – Avg. Annual growth of 0.3% (US) and 0.1% (Canada) could limit

workforce growth and office space demand

55+ Avg. Annual growth of 1.6% (US) and 1.9% (Canada) will drive Medical Office demand and age restricted

apartment demand


Going Mainstream Expands the Income MultipleThe Path from Pre-Core to Institutional AcceptanceAnticipating and Driving Transition to acceptance from institutional investors

Pioneering Investors

Profession-alization

Performance Measurement Convergence Acceptance

Inco

me

Mul

tiple

Hig

hLo

w

Pre-core(and “Never-core”)

Next-core

Core

Current niche positioning in “going mainstream” framework

Self Storage

Data Centers

Medical Office

2015 vs Current Position

Parking

Seniors Housing

Student Housing


Going Mainstream Expands the Income MultipleThe Path from Pre-Core to Institutional AcceptanceSecurities Investors access all these sectorsThe US Niche Sector Transparency and Performance

Performance

Tran

spar

ency

Hig

hLo

w

HighLow

Parking

StudentHousing

MedicalOffice

Seniors Housing

SingleFamilyRentals

Manu-facturedHousing

SelfStorage

DataCenters

Cell Towers


Europe ISA 2018 PREVIEW


BREXIT Timing*

*Note: for illustration onlySource: LaSalle Investment Management


ECONOMIC GROWTH

Eurozone GDP growth forecast at 2.2% for 2017, strongest since 2007

Source: Oxford Economics (03/17, 09/17), LaSalle (10/17)Note: Green boxes indicate upgraded forecast from 6 months earlier, grey unchanged within 10bps, orange downgraded

3.9

3.2

2.42.3 2.2

1.81.7

1.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

16 17 18 19 16 17 18 19 16 17 18 19 16 17 18 19 16 17 18 19 16 17 18 19 16 17 18 19 16 17 18 19

Poland Spain Sweden Germany Netherlands France United Kingdom Italy

GDP growth% p.a.

Mar 17: 3.1 Mar 17: 1.9Mar 17: 2.6 Mar 17: 1.5 Mar 17: 1.4 Feb 17: 1.9 Mar 17: 0.9Mar 17: 2.8


2017 Headline results – score components

0.43

0.50

0.77

0.66

0.68

0.34

0.40

0.41

0.42

0.45

0.49

0.54

0.86

0.72

0.34

0.45

0.34

0.52

0.60

0.00 0.50 1.00 1.50 2.00 2.50

GDP

Employment

Human Capital

Wealth

BusinessEnvironment

2017 Scores

LaSalle E-REGI 20171. London

2. Paris

3. Stockholm

4. Istanbul

5. Dublin

6. Luxembourg

7. Munich

8. Oslo

9. Stuttgart

10. Copenhagen-Malmö

11. Zürich

12. Madrid

13. Berlin

14. Brussels

15. Lyon

Source: LaSalle (09/17)


0%

10%

20%

30%

40%

50%

60%

70%

0

5

10

15

20

25

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217

Q317

Rol

ling

Annu

al %

of T

otal

(%)

Inve

stm

ent (

£ bi

llion)

Rest of UK Central London Office

YET LONDON STILL ATTRACTIVE & FOREIGN INVESTORS HIGHLY ACTIVE

Slowing investment volumes due to pricing, risk & lack of product

Q3 data is preliminarySource: LaSalle (09/17) Property Data (09/17)

Investment Volumes[Overall]

Rolling AnnualCentral London Office % (rhs)


CANADA TIGHTENS; BRAZIL LOOSENS AGAIN

Europe’s interest rate expected to stay flat or very low until 2020+

Source: Oxford Economics, LaSalle. Latest as of November 2nd 2017

-1%

0%

1%

2%

3%

4%

5%

2008

Q1

2008

Q3

2009

Q1

2009

Q3

2010

Q1

2010

Q3

2011

Q1

2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

2014

Q3

2015

Q1

2015

Q3

2016

Q1

2016

Q3

2017

Q1

2017

Q3

2018

Q1

2018

Q3

2019

Q1

2019

Q3

2020

Q1

2020

Q3

UK Japan United States Eurozone

Central Bank Effective Policy Rates

Forecast

Tigh

ter P

olic

yLo

oser

Pol

icy


Asia PacificISA 2018 PREVIEW


EXPECT FINANCIAL REFORMS TO CONTINUE IN CHINA

The US vs. China – established vs. rising superpower

Note: * Economic infrastructure spending refers to infrastructure spending that generates economic values. **HNWIs are defined as those who have investable assets of USD1 million or more, excluding primary residence, collectibles, consumables and consumer durables.*** Blue represents the US; and Red represents China.Source:(1) Oxford Economics, as of 24th October 2017; (2) Bridging Global Infrastructure Gap, as of June 2016, Mckinsey Global Institute; (3) The Fortune 2017 Global 500; (4) World Intellectual Property Organization as of 2015, (5) Capegemini World Wealth Report, as of September 2017.

GDP (USD trillion, Current Price)1GDP Per Capita (USD, Current Price) 1

USD 59,170(2017e)

USD 8,691(2017e)

19.3

25.8

12.3

27.0

2017e 2025f

Economic Infrastructure Spending* as % of GDP2

Headquarters of Global Fortune 500 companies3 High Net Worth Individual5**Patent Application4

2.4%

8.8%

Ann. Avg(2008-2013)

132

109

No. of Companies(2017)

4.8

3.5

1.0

5.1

Population (million) Wealth per HNWI(USD million)

0.6

1.1

Patent Application (million)


SINGLE-DIGIT RATES IN MANY COUNTRIES SUGGEST LONG TERM GROWTH

E-Commerce Sales Penetration Rising Fastest in China and UK

Source: eMarketers, National Bureau of Statistics of China, Oxford Economics, as of 2016

33.6%

19.3%

14.7%

9.9% 9.8% 9.7%8.8%

7.3% 7.2%

0%

5%

10%

15%

20%

25%

30%

35%

China UnitedKingdom

South Korea Germany United States Japan Canada France Australia

E-C

omm

erce

Sal

es A

s %

of T

otal

Ret

ail

% of Total Retail Sales, 2016 % of Total Retail Sales, 2019


THE N. KOREA-US STAND-OFF IS A PRESSING GEOPOLITICAL ISSUE IN THE REGION AND THE WORLD

Key macro risk: North Korea threat

Source: Volatility indexes, sourced from Bloomberg, as of 1st November 2017

NOV 2000:Election of

George W. Bush

SEP 2011:911

MAR 2003:Second Gulf War

(Iraq) JUL 2011:Syria Civil War

NOV 2016:Election of

Donald Trump

0

10

20

30

40

50

60

70

80

90

Oct

200

0

Apr

200

1

Oct

200

1

Apr

200

2

Oct

200

2

Apr

200

3

Oct

200

3

Apr

200

4

Oct

200

4

Apr

200

5

Oct

200

5

Apr

200

6

Oct

200

6

Apr

200

7

Oct

200

7

Apr

200

8

Oct

200

8

Apr

200

9

Oct

200

9

Apr

201

0

Oct

201

0

Apr

201

1

Oct

201

1

Apr

201

2

Oct

201

2

Apr

201

3

Oct

201

3

Apr

201

4

Oct

201

4

Apr

201

5

Oct

201

5

Apr

201

6

Oct

201

6

Apr

201

7

Oct

201

7

Vola

tility

Inde

x

Stock Market Volatility Inferred From Major Geopolitical Events

US VIX Index (LHS) South Korea VIX (LHS)

YTD 2017:Trump Administration

North Korea fired 22 missiles in 15 tests;conducted a nuclear test

2001 – 2009:George W. Bush Administration


Debt-to-GDP Ratio1

Key macro risk: overall debt levels

Note: 1. Household debt includes debt from households and non-profit institutions serving households. 2. Pre-GFC refers to Q1 2006Source: (1) Debt data is sourced from BIS total credit statistics, as of Q1 2017

0%

50%

100%

150%

200%

250%

Australia China Hong Kong Japan S. Korea Singapore Germany United States

Deb

t-to-

GD

P R

atio

Government Non-financial corporations Households* Pre-GFC level2


THIS LEVEL OF ALLOCATION FROM GLOBAL REAL ESTATE INVESTORS IS DIFFICULT

Asia Pacific is the 2nd largest global institutional real estate market

Source: Global Real Estate Universe 2017, LaSalle Investment Management, as of March 2017

34.8%

Asia Pacific, 32.0%

28.5%

4.7%

Americas Asia Pacific Europe Middle East and Africa

Institutional Owned Real Estate Universe by Region (total USD$9.6 trillion)


Office Supply Pipeline - Major Markets

46

2018 - 2019

Source: JLL, October 2017. Covers all office sub-markets in each city. Tokyo – CBD - 5 kus

0 5 10 15 20 25

Los AngelesTorontoMadridBoston

ChicagoDubai

StockholmSingapore

MilanNew York

SydneyWashington DC

BrusselsFrankfurt

Hong KongParisSeoul

Sao PauloSan Francisco

MoscowLondon

Mexico CityTokyo

MumbaiBeijing

Shanghai

Completions as % of existing stock2018 2019


*In USDIncludes apartment, industrial, office, and retail transactions. Excludes privatization and deals under $5 million.Source: RCA. Data through Q3 2017

Cross-Border Trends Vary by MarketRising in the UK, Japan, and U.S., falling in France and China

0%

10%

20%

30%

40%

50%

60%

Cro

ss B

orde

r Sha

re o

f Tot

al T

rans

actio

n Vo

lum

e

2007 - 2014 Quarterly Average 2015 - Q3 2017 Quarterly Average

Annual Cross-Border Transactions As a Share of Total Volume in Local Currency


Includes apartment, industrial, office, and retail transactions. Excludes privatization and deals under $5 million.Source: RCA. Data through Q3 2017

Annual Inbound Cross-Border Capital

Long-Term Trend Shows Increasing International FlowsCross-Border Flows are Pro-Cyclical

15%

20%

25%

30%

35%

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Trai

ling

Four

-Qua

rter C

ross

-Bor

der T

rans

actio

n Vo

lum

eS

hare

of T

otal

Global Cross-Border Transactions as Share of Total

Current 3-Year Average: 27.4%

2012 3-Year Average: 22.2%


Predictions for 2016Predictions for 2017

X Canada Builds a Wall (Trudeau-Trump Summit… a big nothing)

Trump Administration Infrastructure Outlays in 2017 = 0

UK Divorce Papers Sent to Brussels

Poor Air Quality Shuts down Beijing for a week or more

XX US Ten Year Bond Reaches 3.0%

…and US real estate values do not fall.


Predictions for 2016Predictions for 2018

1. Three Bears Stay in their Cave

2. US Congress Flips from Red to Blue

3. ECB ends QE, Bond Yields Gap Out

4. PyeongChang: Financial Disaster, Logistical Success

5. US Ten Year Bond Reaches 3.0%

…US Malls Re-Price

…Other Property Prices Flat or Up


lasalle.com

Amsterdam • Atlanta • Baltimore • Brisbane • Chicago • Hong Kong • London • Luxembourg • Madrid • Munich • Mexico CityNew York • Paris • Prague • San Diego • San Francisco • Seoul • Shanghai • Singapore • Sydney • Tokyo • Toronto • Vancouver

LaSalle Investment Management

Predictions for 2017 and 2018 are the personal opinions of Jacques Gordon and do not necessarily represent the views of LaSalle Investment Management.

This information is intended to assist professional investors in deciding whether they wish to consider the investment further. This publication does not constitute an offer to sell, or the solicitation of an offer to buy, any securities or any interests in investment funds sponsored by, or the advisory services of, LaSalle Investment Management and is subject to correction, completion and amendment without notice. Any such offer, if made, will only be made by means of a confidential prospectus. The prospectus will include information regarding investment risk and investors should have the financial ability and willingness to accept these risks. All information obtained from third party sources is believed to be reliable and current, but accuracy cannot be guaranteed and we do not undertake to update any information contained in this document. All assumptions, figures and calculations contained in the information must be independently verified by the professional investor. This publication has been prepared without regard to the specific investment objectives, financial situation or particular needs of recipients. No legal or tax advice is provided. Recipients should independently evaluate specific investments and trading strategies. By accepting receipt of this publication, the recipient acknowledges that this publication is confidential and agrees not to distribute, offer or sell this publication or copies of it and agrees not to make use of the publication other than for its own general information purposes. Copyright © 2017 LaSalle Investment Management. All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior permission of LaSalle Investment Management.

global property market 2018 outlook - real estate …...2017/11/23 · 2018 outlook november 28,...

Documents