investing in norway from an international real estate market perspective chris staveley 9 th...
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Investing in Norway from an international Real Estate Market Perspective
Chris Staveley9th February 2012
International
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Akershus Eiendom: international cooperation
Jones Lang LaSalle: Our Global Capital Markets Platform Combining the in-depth local knowledge of over 1,300 investment and corporate finance professionals based in 209 offices around the world
Completed over $300 billion of sales, acquisitions and finance transactions since 2006, of which over 40% have been cross border
Unique relationships with active sellers and buyers across the globe through the International Capital Group
Akershus Eiendom has had a formal cooperation agreement for 10 years with Jones Lang LaSalle as its sole partner in Norway since the agreement was signed in 2001
The cooperation agreement includes transactions, corporate solution services for key clients, research and valuation
3
European Commercial Real Estate Demand is Global
Global Sources of Funds
9.1
2.83.4
13.9
GlobalAsia Pacific
AmericasEurope
Middle East
NB: Other geographies or unknown capital accounted to EUR 5.8 billion
83.5
Equity rich investors (e.g. Canadian and US pension funds) from the Americas have become increasingly active across Europe in 2011
Sharp increase in capital flows from outside Europe
-50-25
0255075
100
Americas Asia Pacific MENA
%
YoY growth in capital inflows
Capital Sources 2011 (€bn) % Change YoY
European 87.1 +4%International 31.6 +57%
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, January 2012
2011: €bn
44
European Transaction Activity 2011
EUR bn
TOTAL EUR 118.7 bnOffice 44%
Retail 33%
Industrial 8%
Other 14%
36.8
3.7
3.8
16.1
2.4
1.8
3.2
22.8
2.2
8.4 5.81.9
1.8
1.6
0.5
1.6
1%
29%
32%
17% 108%
-45% -2%
0.6
6% 35%
European Investment Volumes (all commercial sectors, EUR bn)
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, January 2012
Circles: € billions traded in full year 2011% change 2010 vs. 2011
2011 Volume by sector
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Regent St Estate* (25%)London, UKNBIM (Norway)€550m
Aviva Tower*London, UKPrivate (Indonesian)
€326
11-12 St James*London, UKMEPF (Malaysia)
€168m
O’Parinor (51%)*Paris, FranceNPS (South Korea)
€223m
20 Columbus Courtyard*London, UKM1 (Lebanon)
€180m
1 Kingdom Street*London, UKCityhold Property AB Group (Sweden)
€268m
Polish Telecoms*Warsaw, PolandQatar Holding (Qatar)
€135m
PEP* Munich, GermanyTIAA-CREF(USA)
€400m
New Capital Sources in the European Market
Hotel de Crillon* Paris, FranceRoyal Family(Saudi Arabia)
€250m
* Jones Lang LaSalle advised
Olympia*Brno, Czech RepublicECE and NPS(Germany and South Korea)
€262.5m
6
Investment in the Nordics has been strengthening
5
11
4
10
5
8
5
8
6
4 43
1 2 2 3 2 2
6
2
53
5
3
0
2
4
6
8
10
12
Q1 06
Q2 06
Q3 06Q4 0
6Q1 0
7Q2 0
7Q3 0
7Q4 0
7Q1 0
8Q2 0
8Q3 0
8Q4 0
8Q1 0
9Q2 0
9Q3 0
9Q4 0
9Q1 1
0Q2 1
0Q3 1
0Q4 1
0Q1 1
1Q2 1
1Q3 1
1Q4 1
1
€ bn Quarterly volumes
Quarterly Average
Nordic Market Share
Nordics13%
France14%
CEE & Russia11%
Germany19%
Benelux4%
Other Europe2%S. Europe
5%UK
31%
Nordics increasing their market share – the market was a similar size to France in 2011
Source: Jones Lang LaSalle; Akershus Eiendom (Norway) Sadolin & Albaek (Denmark), January 2012
7
0
25
50
75
100
Norway Sweden Finland France Germany Denmark Europe -Average
UK
Mar
ket S
hare
(%)
Domestic
As highly liquid markets, the dominance of domestic investors in Sweden and Norway illustrates the level of wealth within the countries
Domestic Purchasers Drive the Nordic Markets in 2011
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, IHS Global Insight Jan 2012
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Where Real Estate capital wants to invest 2012
UK – remains attractive as a highly liquid market and a perceived “safe haven” sitting outside the €zone
CEE – continued growth will attract investors with some appetite for risk; activity will be driven by availability of product
NORDICS – investors like the Nordics because their better than average economic outlook
RUSSIA – positive long term growth trend will attract more international capital into the market
FRANCE –Strong recovery since 2009 but volumes could fall after deals were brought forward to take advantage of the tax incentive
GERMANY – investors attracted to the stability offered by the economy
SOUTHERN EUROPE – High levels of investor caution; some interest from opportunity funds but pricing will have to adjust further
DECREASE IN INVESTMENT
FLAT
INCREASE IN INVESTMENT
Source: Jones Lang LaSalle
9
6.2
3.9
5.1
2.9
0.4 -1.9
-3
-2
-1
0
1
2
3
4
5
6
7
CEE & Russia Germany France Nordics UK Southern Europe
Change in Vol. (€bn)
0
0.5
1
1.5
2
2.5
3
3.5
4GDP Growth p.a (%)
Change in Volumes (2010 vs. 2011)
GDP Annual Growth (2012-15)
Countries with Stronger Outlook will attract CapitalNet Growth in Investment in 2011 (€bn)
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, Oxford Economics, Global Insight Jan 2012
1010
Note
This diagram illustrates where Jones Lang LaSalle estimate each prime office market is within its individual rental cycle as at end of December 2011
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
European Office Property Clock Q4 2011
Rental GrowthSlowing
RentsFalling
Rental GrowthAccelerating
RentsBottoming Out
Barcelona, BrusselsAmsterdam, Budapest,Dublin, MadridEdinburgh, RomeSt. Petersburg
Milan
Cologne
Lyon, Stuttgart
The Jones Lang LaSalle Property ClocksSM
Copenhagen
AthensLisbon
Bucharest, Frankfurt, Istanbul, Kiev, Luxembourg, Prague
Berlin, Hamburg, Munich
Düsseldorf, Geneva, Stockholm
Warsaw
Helsinki
Moscow
Oslo
London City, London West End, Paris, Zurich
Source: Jones Lang LaSalle IP, January 2012
1111
-15 -10 -5 0 5 10 15 20 25 30 35 40 45
Dublin
Madrid
Prague
Frankfurt
Amsterdam
London City
Milan
Munich
Hamburg
Stockholm
Copenhagen
Helsinki
London WE
Paris
Warsaw
Oslo
Moscow
% change
Office Rental Trend is Strong in Nordic Markets…
Source: Jones Lang LaSalle; Akershus Eiendom (Norway), January 2012
Prime Office Rental Change Q4 2010 – Q4 2011
12
Q4 2011 Office Capital Value/m2 vs.10-year Average
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
(local currency in 2011 prices)
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Domestic Dominance but Very Liquid Markets
0 100 200 300 400 500 600 700 800 900 1000
Portugal
Ireland
Spain
Russia
Italy
Poland
Netherlands
France
Germany
Finland
UK
Norway
Sweden
Investment per Capita (EUR)Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, IHS Global Insight Jan 2012
Direct RE Investment per capita: 2011
* Central London investment volumes includes offices only
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The Norwegian Market has High Levels of Transparency
1.0United Kingdom, Sweden, Ireland, France, Netherlands Germany, Belgium,
Denmark1.5
Finland, Spain, Austria, Portugal, Switzerland, Italy, Poland
2.0South Africa, Czech Republic Hungary, Israel
2.5Greece, Slovakia, Russia (Tier 1-2 Cities)
Romania, Turkey3.0
Bulgaria, Russia (Tier 3 Cities), Ukraine, Slovenia
3.5Croatia, Kazakhstan
4.0Belarus
4.5
5.0
Source: Jones Lang LaSalle, LaSalle Investment Management
Highest
High
Semi
Low
Opaque
NORWAY
15
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Oslo Europe
Oslo Prime Yields becoming more Aligned with Europe
Oslo Europe*
Current Prime Yield 5.25% 5.27
10 Year Average 5.71% 5.42
20 Year Average 6.75% 5.62
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20 Year Average
20 Year Average
Prime yields in Oslo are in line with a weighted European average but are sitting well below the long-term average
Source: Jones Lang LaSalle; Akershus Eiendom (Norway), January 2012
Prime Yield %
* Yield is weighted
16
2012-2013 % p.a. % p.a.
Over-performers Under-performers
London – City 7.0 Utrecht 0.4
Warsaw 5.6 Luxembourg 0.4
Edinburgh 5.4 The Hague 0.0
Moscow 5.1 Dusseldorf 0.0
Oslo 5.0 Brussels 0.0
Rental Forecasts Strongly suggest Outperformance in Oslo
Source: Jones Lang LaSalle, December 2011
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Forecast
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2006 2007 2009 2009 2010 2011 2012 2013 2014
Forecast
0
12
3
4
56
7
89
10
2010 2011 2012 2013 2014 2015 2016
Norwegian Economic Outlook is PositiveCo
nsum
er P
rice
Inde
x An
nual
Gro
wth
(%)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Norway Finland UK Sweden Denmark Germany France
Annu
al A
vera
ge G
rowt
h 20
12-1
6 Over 2012-2016 Norway’s average annual growth outperforms other major European economies
Norway
GermanySwedenUKFinland
Source: Oxford Economics
Norwegian inflation forecast to remain below target Unemployment expected to remain low
Norway GDP growth looks set to outperform
ILO
Um
empl
oym
ent R
ate
(%)
• Higher GDP growth than Europe in 2012: we forecast + 2.3% vs. + 0.2% in the EU-27
• Better labour market in Norway: unemployment is one of the lowest in Europe
• While inflation is under control: inflation is anticipated to remain below target
18
Norwegian Bonds relatively stable against German bunds
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
UK Spain France Norway
JFirst bail-out in
Source: Datastream; February 2012
% p
oint
spr
ead
over
Ger
man
10
year
bun
ds
Source: Datastream; February 2012
19
China
SwedenSwitzerland
Turkey
Denmark
Luxembourg
Czech Rep
Iceland
Finland
Norway
HungaryAustria
Germany
NetherlandsSpain
Belgium
France
Portugal
Italy
UK
Ireland
USA
Greece
0
20
40
60
80
100
120
140
160
180
-15 -10 -5 0 5 10 15
Sovereign Debt, not an issue for NorwayG
over
nmen
t Tot
al D
ebt a
s %
of G
DP 2
011
Source: Global Insight, November 2011 Government Fiscal Balance % GDP 2011
Developed Countries – Total Government debt and fiscal balance as a % of GDP
20
Nordic Regions’ Banks’ Tier 1 capital ratios healthy
-2
0
2
4
6
8
10
12
14
Pira
eus
EFG
Eur
oban
kNB
GKB
C Ba
nkCr
edit S
uiss
eAl
pha
Bank
Cred
it Agr
icole
BCP
Com
mer
zban
kDe
utsc
he B
ank
Banc
oUB
SBM
PSLl
oyds
SocG
enUB
I Ban
caHS
BCBa
nco
Saba
dell
BBVA
BNP
Parib
asBa
rcla
ysBa
nkin
ter
Banc
o Po
pula
rRB
SSa
ntan
der
Dans
ke B
ank
Inte
saDn
B NO
RNo
rdea
Ban
kSw
edba
nkS
E B
Hand
elsb
anke
n
%
Nordic banks are the most well capitalised in Europe and will have more scope for lending activity
Source: Bank of America Merrill Lynch Equity Research
21
0 100 200 300 400 500 600 700
ADIA - UAE
SAFE - China
Govn PF - Norway
SAMA - Saudi Arabia
CIC - China
KIA - Kuwait
HK Monetary Authority - China
Govn of Singapore Inv. Corp
Temasek Holdings - Singapore
Nat. Social Security Fund - China
Source: www.swfinstitute.org
Strong Capital Base will support Norwegian Market…
Top 10 Global Sovereign Wealth Funds
Total Assets (US$bn)
22
Forecast
… and Population Growth in Norway and Oslo Region is Strong
95
100
105
110
115
120
125
130
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Norway
Oslo
Stockholm
London
Paris
EuropeanUnion
Population Growth Forecasts
Annu
al P
opul
atio
n G
rowt
h In
dex
(200
5=10
0)
+7%
+27%
+3%
+18%
+13%
Source: Oxford Economics; December 2011
23
Investing in Norway – International Perspective
• European real estate demand is global
• Nordic investment is relatively strong – but highly domestic
• Norwegian market has strong prospects and will attract new capital sources
• Norwegian economic backdrop is very robust – should increase the relative attractiveness of the market
• Perception of a lack of liquidity – not necessarily real
• Domestic competition and transaction speed are barriers
• A market too far for regional funds? – Should not be the case
24
This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent ofJones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.
Chris StaveleyInternational DirectorEuropean Capital MarketsLondon+44 (0) 20 7399 [email protected]
Takk!