jll market overview - amcham€¦ · jll market overview 07 march 2017 amcham. 2017 outlook 2...

JLL Market Overview

07 March 2017

AMCHAM

2017 Outlook

2

• Political risk – is this political noise distracting us from the underlying fundamentals?

• How to price the UK – is the UK decoupling or will its real estate markets revert to trend?

• “Trumpflation” – how will real estate markets react to higher inflation and rising bond rates?

The Big Questions for 2017

Real View: Our Predictions for 2017

• Lower for longer – basic economics: lower growth (supply) + rising capital (demand) = lower returns

(price)

• Premium for prime – institutional investors search for secure income not yield

• Less tolerance for losers – increasing cost of capital and compressing yields force strategic rethinks

• Difficult environment to source product – wall of capital targeting real estate ramps up bids on assets

3

Industrial Market Overview

2016 surpasses 2015 record levelsTotal industrial take-up eclipses previous year by nearly 2 million sq m

4Source: JLL, Q4 2016

31%

12%

9%9%

9%

8%

6%

6%

6%3% 1%

Germany

UK

Poland

Russia

Netherlands

France

Italy

Spain

Belgium

Czech Republic

Hungary

35%

35%

17%

10%3%

retail

3PL

manufacturing

e-commerce

others

Germany takes lion’s share

19.1million

sq m

YoY+12%

on 5-year average+28% 51%share Top 3 markets

Retail takes lead from 3PLs

11.5 millionsq m

Development activity trending upwardsNew supply continues to enter market at hastened pace

31%

15%

15%

11%

11%

7%

5%4% 1%

Russia

Netherlands

Italy

Poland

Spain

UK

Czech Republic

Germany

France

30%

15%

13%

10%

8%

6%

5%

5%4% 3% 1%

Germany

UK

Russia

Poland

Netherlands

Belgium

France

Spain

Czech Republic

12.6 millionsq m

Completed in 2016

Under Construction at end of Q4 2016

Speculative development (20% excluding Russia)25%

YoY

+74% on 5y average+27%

on 5y average+60%

YoY+25%

Total completed

Speculative space under construction


European Industrial Vacancy RatesEuropean vacancy rates historically low

London

BarcelonaMadrid

Milan

Budapest

Munich

Lyon

Warsaw

FrankfurtBrussels

Paris

Birmingham

Rotterdam

Stockholm

Prague

Poznan

7.2%

6.0%

0.9%

Hamburg

5.0%

Wroclaw

4.5%

3.0%

8.0%

0.0%

Moscow

5.0%

Bratislava

Gothenburg

5.0%

Zagreb

3.5%

Bucharest

12.2%

4.2%

7.0%

6.0%

Estimated

Aggregate European Rate

Vacancy Rates

< 5.0%

5.0% - 10.0%

10.0% - 15.0%

Increase YoY

Stable YoY

Decrease YoY

Vacancy Rate

Change

6.0%

6.3%

5.0%

3.4%

3.2%

4.7%

6.6%

5.2%

3.4%


STOCK

TAKE UP

NEW

COMPLETIONS

Czech Republic - Industrial Property Market

VACANCY

4.7% Czech Republic

3.5% Greater Prague

2.4% - 10.0 % in Brno, Pilsen

and Ostrava.

510,000 m2 in 2016

UNDER CONSTRUCTION

482,100 m2 (Q4 2016)

6.27 million m2 of new high quality industrial space

Major markets: Prague (40 %), Pilsen (15.5 %),

Brno (14 %)

Emerging location: Karlovy Vary Region, South

Bohemia Region

1,455,600 m2 gross take-up in 2016 (+1% y-o-y)

880,300 m2 net take-up in 2016 (-5% y-o-y)

PRIME RENTS

3.80 – 4.25 EUR /m2/month

Industrial

Source: JLL, Industrial Research Forum (January 2017)

7

Czech Republic Major Transport Corridors

Source: JLL (January 2017)

8

Completions vs Vacancy RateVacancy rate at the record low level of 4.7% at the end of 2016.

m²


STRONG GROWTH SLOWDOWN BACK ON GROWTH TRACK

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Completions Vacancy Rate

9

Greater Prague40%

Pilsen region16%

Brno region14%

Ostrava region7%

Central Bohemia region

6%

Ústí nad Labem region

4%

Liberec region3%

Pardubice3%

Other7%

Industrial Space by Czech Regions and Ownership

CTP Invest35%

Prologis16%

P31…

Accolade3%

D+D Real3%

VGP3%

AEW2%

SEGRO2%

NBGI2%

Other19%


10

0

100,000

200,000

300,000

400,000

500,000

600,000

2012 2013 2014 2015 2016

Non Speculative Speculative

New Industrial Supply by Type of ConstructionShare of speculative construction on rise, for 2016 approx. 27% of new supply was speculative


11

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2010 2011 2012 2013 2014 2015 2016

New Demand Renegotiation

5-year Gross Demand Average:

1,283,000 sqm

5-year Net Demand Average:

781,000 sqm

2016 gross take-up above 2015 record level


m²

12

Greater Prague36%

Pilsen17%

Karlovy Vary11%

Ústí nad Labem9%

Ostrava6%

Pardubice4%

Brno4%

Other13%

2016 Net take-up

Prague, Pilsen and Karlovy Vary on top of net demandin 2016

Greater Prague37%

Pilsen17%

Brno9%

Ústí nad Labem6%

Ostrava6%

Central Bohemia5%

Olomouc5%

Other15%

2015 Net take-up


13

Park Tenant Sector Transaction Type Area (m2)

Panattoni Park Cheb Tchibo Retail Pre-lease 73,100

CTPark Prague North Makro Retail Pre-lease 53,000

P3 Prague D1 Hopi 3PL Renewal 46,300

P3 Prague Horní Počernice MD Logistika 3PL Renewal 39,700

Prologis Park Prague-Rudná Sportisimo Retail Pre-lease + expansion 34,800

Prologis Park Prague-Jirny Confidential E-commerce Renewal 31,800

Prologis Park Prague-Jirny Confidential Retail Pre-lease 30,400

Prologis Park Prague D1 West Confidential 3PL Renewal 27,500

The Largest Leasing Transactions in 2016

14


3PL26%

Retail, e-commerce and distribution

43%

Production30%

Other, n/a1%

2016

Distribution, retail and e-commerce as a main driver of netindustrial demand

3PL30%

Retail, e-commerce and distribution

27%

Production43%

2015


15

Speculative construction pushed the vacancy rate up in the Pilsen region at the end of 2016

Vacancy Rate in Major Czech Regions


5.1%4.8%

5.8%

5.1%

9.7%

4.7%

3.5%

5.1%

10.0%

2.4%2%

4%

6%

8%

10%

Q4 2015 Q4 2016

16

Source:JLL (January 2017)

Czech Republic rental map, Q4 2016

17

Prime Industrial Rents

Source: JLL (January 2017)

2004-2016

0 €

10 €

20 €

30 €

40 €

50 €

60 €

70 €

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

18

• Strong supply levels with higher share of speculative construction

• Strong demand of Czech households to support further growth of retail, e-commerce and

distribution sectors

• Manufacturing to remain a significant part of the demand but in highly attractive regions

to face difficulties with labour shortage

• Land and permitting issues - increased interest in brownfields in good locations

• New infrastructure – completed D8 and progressing construction on D3 to fuel demand

of developers and investors

• Stable political and economic environment combined with strategic location between

East and West to support further growth and attractivness of the Czech industrial market

• Increased usage of automation to mitigate issues with labour scarcity in logistics and

manufacturing in the future

2017 Industrial Outlook

19

20

Investment Market Overview

2

3

4

5

6

7

8

9

10

11

12

13

14

15Last Peak Last Trough Q4 2016

Yields | Further yield compression recorded in Germany and FrancePrime Office Yields (%) – cyclical low and high

21

%

CEENorthern/Western EuropeSouthern

Europe

Russia /

CIS

Source: JLL, Q4 2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016

UK France Germany CEE Other

European Investment Volumes

22

Source: JLL, Q4 2016

€m

illi

on

CEE: Investment Volumes by Countries2012-2016

Volumes include development transactions.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2012 2013 2014 2015 2016

Other CEE Slovakia Romania Hungary Czech Republic Poland

€m

illio

n

8,823

3,967

6,180

7,741

12,564

Source: JLL CEE Capital Markets, 2017

23

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2012 2013 2014 2015 2016

Hotels Residential Mixed Industrial Retail Office

Czech Republic: Investment Volumes by Sectors

Volumes may include development transactions.

2012-2016


24

3,600

2,700

2,000

1,400

0,700

€m

illio

n

Czech Republic: Investor Source of Capital

80%

20%

International Domestic

74%

26%

International Domestic

2015

€2.65 Bn(46 Deals)

2016

€3.62 Bn(64 Deals)

Source: JLL CEE Capital Markets, 2017Volumes may include development transactions.

Domestic Investors:

• REICO, RSJ, CPI, PSN,

Palmer Capital, Redside,

Wood & Company

International Investors:

• German Funds – DEKA, VGP,

Allianz Real Estate

• Middle-East and Asian Capital

– GIC Real Estate, CEFC

• South Africa – Rockcastle,

NEPI

• Global – LaSalle Investment

Management

25

Czech Republic: Investor Source of Capital

26

20%

80%

2015

Domestic International

26%

74%

2016


21%

79%

2014


€2.65 Bn(46 Deals)

€3.62 Bn(64 Deals)

€2.03 Bn(45 Deals)

Domestic Investors:

• REICO, RSJ, CPI, PSN, Palmer Capital, Redside, Wood & Company

International Investors:

• German Funds – DEKA, VGP, Allianz Real Estate

• Middle-East and Asian Capital – GIC Real Estate, CEFC

• South Africa – Rockcastle, NEPI

• Global – LaSalle Investment Management

45.25

60.2856.61

28.6 26.21

39.06

53.6

91.39

73.1

0

10

20

30

40

50

60

70

80

90

100

2014 2015 2016

€m

illio

nAvg. Transaction Total Avg. Transaction Domestic Avg. Transaction International

Source: JLL CEE Capital Markets, 2017;Volumes may include development transactions

Active Investors in 2016

Average Volume of Transactions by Source of Capital

CZ Investment Market: Largest Investments by Sectors


Office Lot size in million € Yield Date Seller Buyer

Enterprise 122.0 ca 5.20% Q4 2016 Erste Group Immorent RSJ

The Park 360.0 est. 6.40% Q4 2016 Starwood Capital Deka

Florentinum 283.0 4.85% Q4 2016 Penta Investments CEFC

Retail Lot size in million € Yield Date Seller Buyer

Forum Usti 82.6 7.25% Q2 2016 Meyer Bergman NEPI

Forum Liberec 80.3 est. 6.20% Q2 2016 Tesco Rockcastle

Galerie Harfa 115.0 est. 6.90% Q3 2016 GTC/Lighthouse Wood & Co

Industrial Lot size in million € Yield Date Seller Buyer

VGP Portfolio 50.0 7.00% Q1 2016 VGPVGP/Allianz Real

Estate

P3 Portfolio 760.7 ca 6.00% Q4 2016TPG/Ivanhoe

CambridgeGIC Real Estate

Prologis Park Prague 37.1 n/a Q4 2016 Prologis Norges Bank (NBIM)

27

CEE Exemplarytransactions completed

in 2016

Transacted in 2016

€5.5

Ongoing transactions

€6.7

TheParkEUR 360 mio (sell side)

FlorentinumEUR 283 mio (sell side)

ArenaCentarEUR 237.5 mio (sell side)

NovaParkEUR 88.5 mio (sell side)

Skopje CityMallEUR 92 mio (buy side)

75% of EPP Real Estate Platformca. EUR 900 mio (sell side)

GaleriaWarmińskaEUR 150 mio (sell side)

Central ShoppingCentreEUR 175 mio (buy side)

Gdański Business CenterA&BEUR 186 mio (sell side)

Millenium CityCenterEUR 175 mio (sell side)

Aviva Retail PortfolioEUR 161 mio (sell side)

Hillwood IndustrialPortfolioEUR 150 mio (buy side)

EnterpriseEUR 122 mio (sell side)

Delta CityBelgradeEUR 127.5 mio (sell side)

Prime CorporateCenterPrice confidential (sell side)

Sibiu ShoppingCityEUR 100 mio (sell side)

Delta CityPodgoricaEUR 75 mio (sell side)

OPNBEUR 70 mio (buy side)

Office GardenIIPrice confidential (sell side)

Forum 76, Okraglak & KwadraciakPrice confidential (buy side)

Forum LiberecEUR 80 mio (buy side)

Amazon Fulfillment CenterPrice confidential (buy side)

Vector Parks LogisticsEUR 60-70 mio (buy side)

EiffelSquarePrice confidential (buy side)

DorottyaUdvarPrice confidential (sell side)

NBGIPortfolioPrice confidential (sell side)

Metropolis CenterEUR 48 mio (buy side)

Atrium2EUR 88 mio (sell side)

FerioKoninPrice confidential (buy side)

Krokus,KrakówPrice confidential (buy side)

ZaułekPięknaPrice confidential (sell side)

PixelEUR 32.2 mio (sellside)

Transacted in 2016

€5.5

Ongoing transactions

€6.7

CEE Exemplarytransactions completed

in 2016

Czech Prime Yields vs. Benchmarks

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

2012 2013 2014 2015 2016

Spread CZ prime office yield vs. Real 5 year swap rate CZ Prime Office Yields

CZ Prime Shopping Centre Yields CZ Prime Industrial Yields

10-year Bonds EU 27 Euro 5-Year Swap Rate

European Average Prime Office Yield

%

2012-2016

Source: JLL CEE Capital Markets, Q4 2016

30

Note: The European Average Office Yield is a weighted average of 24 major markets in the region

• The Czech economic fundamentals remain strong in a European context

• Investor apetite for Czech real estate continues although a scarcity of product may potentially limit

transactional activity

• A solid transactional volume of up to €2.5 billion is expected in 2017

• The market is supported by a strong pipeline of transactions across sectors, specifically retail, held

over from 2016

• Institutional capital will continue to seek prime product with strong income and higher WAULTS to

limit risk but are willing to pay higher prices

• New market entrants will often seek well performing office assets as they offer a lower barrier to

entry in terms of the intensity of asset managment

• The retail asset class is also highly attractive to investors is much more management intensive

• The industrial asset class is dominated by a small number of large experienced platforms and is

therefore more challenging to establish a strong presence through the acquisition of individual assets

• In general, commercial real estate remains a compelling investment vehicle in terms of its higher

yielding returns in comparison to other investment classes

2017 Investment Outlook

31

Miroslav Barnáš

[email protected]

+420 224 234 809

jll market overview - amcham€¦ · jll market overview 07 march 2017 amcham. 2017 outlook 2...

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