how to maximise your investment in modern europe chris staveley european capital markets
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How to Maximise your Investment in Modern Europe
Chris Staveley
European Capital Markets
Direct real estate investment in Europe Transaction volumes set a new record at €95bn for 1H 2006
Source: Jones Lang LaSalle; Property Data (UK); KTI (Finland)
Eur bn
39.6 47.8 50.9 45.571.2 64.0
30.7
23.625.0
33.9 40.2
59.092.3
64.3
0
20
40
60
80
100
120
140
160
180
200
2000 2001 2002 2003 2004 2005 2006
Cross-BorderDomestic
Breakdown of transactions by location of asset H1 2006 UK transactions still dominate with Germany in second place ahead of France
UK36%
Germany21%
Other12%
Netherlands3%
Spain4%
France16%
Sweden8%
Source: Jones Lang LaSalle; Property Data (UK); KTI (Finland)
Investor Types H1 2006
Hotel operator2% Institutions
11%
Private Individuals / Syndicates
15%
Unlisted Funds43%
Unlisted PropCos/ Developers
8%
Other5%
Listed PropCos/ Developers
8%
Listed REITs8%
Source: Jones Lang LaSalle; Property Data (UK); KTI (Finland)
European Direct Real Estate Investment Volumes by SectorMore than half of volume in offices and a quarter in retail. Hotels rise to 12%
0%
20%
40%
60%
80%
100%
2000 2001 2002 2003 2004 2005 2006 H1
Mixed-Use / Other
Hotel
Industrial
Retail
Office
Unlisted Funds – pan-Euro Institutions - Sweden
REITs – French offices Middle East investor - London
What next?
EMEA Largest MarketsTop 10 Markets (GDP Weights)
GDP Growth Rate % p.a.
Trend ’06-10
2006 2007 2008
1.7 2.3 1.3 1.7
2.3 2.6 2.4 2.3
2.1 2.3 2.0 2.0
1.4 1.6 1.2 1.4
2.8 3.6 3.1 2.7
5.9 6.6 6.1 5.8
2.6 2.9 2.8 2.2
2.1 2.5 2.1 2.1
2.0 2.9 2.0 1.7
5.2 5.2 4.4 5.6
2.4 2.8 2.3 2.3
“Weighted averageSource: Consensus, September, November 2006, EIU November 2006
Mean*
Germany
UK
France
Italy
Spain
Russia
Netherlands
Belgium
Switzerland
Turkey
0 1000 2000 3000
2005 $US bn
Short Term Rental Cycle Q3 2006
Note:
• This diagram illustrates where Jones Lang LaSalle estimate each prime office market is within its individual rental cycle as at end September 2006.
• Markets can move around the clock at different speeds and directions.
• The diagram is a convenient method of comparing the relative position of markets in their rental cycle.
• Their position is not necessarily representative of investment or development market prospects.
• Their position refers to Prime Face Rental Values
OFFICES
Lisbon
Prague, Amsterdam, Milan, Rome, Vienna, Athens, Edinburgh
Düsseldorf, Zurich
Berlin
London City, Madrid
Rentalgrowthslowing
Rentsfalling
Rentalgrowth
accelerating
Rentsbottoming
out
Moscow
Munich, Luxembourg, Helsinki, Budapest
Brussels, Frankfurt, Geneva, Warsaw
Dublin
Paris
Copenhagen
London West End
Stockholm, Lyon, Hamburg
Oslo
Barcelona
Investment Markets
Source: Jones Lang LaSalle; Property Data (UK); KTI (Finland)
39.6 50.9 45.571.2 64.0
30.7 0.047.823.6
33.9
59.0 92.3
64.340.225.0
0
50
100
150
200
2000 2001 2002 2003 2004 2005 2006 2007
Cross-Border Direct Investment
Domestic Direct Investment
Eur bn
“Stable Transaction Volumes despite Lower Returns – with continued Investor Demand and Yield Levels remaining firm through 2007”
“Watch interest rates with care”
Forecast
Positive Employment Growth in all Markets
Financial Services (0-1.5%) Higher in Estonia, Hungary, Ireland, Slovakia, Romania
Healthy Business Services Growth (1.5 - 3%) Higher in Czech Republic, Greece, Hungary, Ireland, Latvia, Luxembourg, Lithuania, Romania
Office Leasing
’000 m²
Forecast
Western Europe: Amsterdam, Barcelona, Berlin, Brussels, Dublin, Dusseldorf, Frankfurt, Hamburg, London (City & West End), Madrid, Milan, Munich, Paris, Stockholm,
Central & Eastern Europe: Budapest, Moscow, Prague, Warsaw
0
2000
4000
6000
8000
10000
12000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 '06 '07 '08
Western Europe
Central & Eastern Europe
“Gross Leasing Activity to match 2006”
Expansion, Contraction and M&A Availability & Price of Space GDP & Job Growth Health of Service Industries
Office Supply – Vacancy Rates & Completions‘000 m²
Western Europe: Amsterdam, Barcelona, Berlin, Brussels, Dublin, Dusseldorf, Edinburgh, Frankfurt, Hamburg, London, Luxembourg, Lyon, Madrid, Milan, Munich, Paris, Rotterdam, Stockholm, The Hague, Utrecht;
Central & Eastern Europe: Budapest, Moscow, Prague, WarsawSource: Jones Lang LaSalle European Research, October 2006
Forecast
“Development Activity and Vacancy Rates Rising in CEE and Limited Supply response in Western Europe with Vacancy Rates on downward
trend”
Retail Macro Indicators remain supportive Cross Border Retailers continue to expand Development market really active Unquenchable Investment Demand
“Continuing sector strength”
Logistics
“Expect increasingly active occupier and development market in 07/08 with continued strong investor demand”
Drive for efficiencies from retailers, manufacturers and 3PL’s Funds seeking product from specialist developers Speculative development in some markets (UK, France, NL)
Sector
Office
Retail (Unit shops)
Warehousing
5.6
4.4
4.2
15.1
20.5
13.6
7.3
6.6
8.0
8.0
8.7
7.8
London
% p.a.
Continental
European Cities
% p.a.
Source: Jones Lang LaSalle European Research
Gross Returns: Capital Cities ’07 – ‘09
Central & Eastern
European Cities %
p.a.
Moscow
% p.a.
Conclusions
Europe’s occupier markets are in upward cycle – all sectors
Investment market to remain cash rich & product poor
Unlisted funds ever more important
Projected returns will be lower but still attractive
Investor confidence is judged still to be strong
2007 Investment Volumes should remain close to record 2006 levels
How to maximise your investment in Modern Europe
Core Markets : London, Paris, Benelux
Growth Markets : Spain, Nordics, Baltics
Recovery : Germany (?)
Emerging markets – Russia, Turkey, Eastern Europe
For more Jones Lang LaSalle research visit www.research.joneslanglasalle.com
COPYRIGHT © JONES LANG LASALLE IP, INC. 2006. Unauthorised reproduction prohibited. This presentation is based on material that we believe to be reliable. While every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors.
Contacts: Chris StaveleyEuropean Capital MarketsTel. +44 (0)20 7399 5340Email: [email protected]