ECONOMIC OUTLOOK INVESTMENT OVERVIEW

Transcription

1 ECONOMIC OUTLOOK INVESTMENT OVERVIEW 13 NOVEMBER 2017 SIMON TOWNSEND SENIOR DIRECTOR MENAT HEAD STRATEGIC ADVISORY

2 WHO ARE CBRE? C B R E G L O B A L P R E S E N C E 75,000 EMPLOYEES 110+ COUNTRIES $320+ Billion TOTAL TRANSACTION VALUE $85+ Billio n MANAGED ASSETS Fortune 500 company since 2008 ranked #214 in

3 GLOBAL CAPITAL FLOWS MIDDLE EAST 2017 CBRE IN & OUT REPORT Economies in the Middle East continue to face challenges in balancing fiscal accounts (due to oil price pressures) and preventing the occurrence of budget deficits this has impacted spending by some of the regions largest sovereign wealth funds Internationally. Whilst Middle East investors continue to spend in Europe, Asia-Pacific and the Americas, the volumes of institutional investment from the same entities within the region is limited in comparison. This is driven by several key factors including the diversification of investment into non oil based economies. Whilst large scale infrastructure investments have been made in Europe by the UAE and Qatar [Gatwick and Heathrow airport respectively], similar interregional investments have not been so visible. It is expected that Qatar for instance will spend US$6n in the UK over the next 3-5 years in infrastructure and energy. In line with previous years, SWF s remain the main source of capital acquiring more than US$4.5bn in real estate globally over the previous 12 months this is however down -17% on the previous year period. Middle East capital accounts for less than 8% of total capital investment 3 the lowest it has been for many years [half that it was by % in Q2 2016]

4 GLOBAL CAPITAL FLOWS MIDDLE EAST 2017 CBRE IN & OUT REPORT Whilst the US remains the top destination for Middle East investors (measured by total investment volumes), US inbound capital flows have retracted to US$3.9bn from US$10.3bn in the same period in the previous year. The decline in US inbound investments has also changed the ranking of the top capital destinations, London has replaced New York. Despite this investment volumes into London have on the same period since last year declined by 9%. The correction in yields partly driven by the post Brexit activity and the depreciation in sterling has re-affirmed London s status as a global gateway city. The continuing increase in money from Asia and more importantly the transaction speeds has continued to press yields and strengthen transaction volumes. In the period CBRE research indicated that US$4bn in total was invested from Hong Kong in central London offices, since Q this number is now more than US$5bn. 4

5 DESTINATION OF CAPITAL The results from the 2017 European Investor Intention Survey was based on 458 respondents from across the European investment landscape. Surprisingly, the UK has replaced Germany as the most popular target for hotel investment capital (was Germany in 2015 and 2016). Secondary locations are increasingly coming into the focus of investors and are becoming an increasingly attractive investment focus with 19% of respondents favouring these Cities. 39% of investors are seeking Capital Cities and more than 31% focussing on Gateway Cities. Only 8% of all respondents would consider resort based locations. 5

6 EUROPE : HOTEL INVESTOR SENTIMENT CBRE EMEA HOTEL INVESTOR SENTIMENT SURVEY 6

7 EUROPE : Q2 INVESTMENT OVERVIEW Total of Euro 74.2bn transacted in Q2 2017, that takes the total for H to Euro 130b. Quarter increase of 25% on Q2 and a H1 increase of 16% compared to the same period in 2016 Strong performance was due to a large extent driven by an upturn in trading activity in the UK. Germany, the driving force behind investment growth in Continental Europe showing an increase of close to 49% compared to H Other European highlights include (compared to H1 2016) Spain seeing more than Euro 17bn transacted in 2017 which is an increase of more than 76% on same period in 2016 and the Netherlands showing an increase over the same period of 38% 7

8 EUROPE : H1 INVESTMENT OVERVIEW - HOTELS The overall European hotel investment volume was up 31% year on year for Q which contributed to a year on year increase of close to 6% Deal volumes reaching almost Euro 9bn The Spanish hotel market soared with an increase of +228% in investment volumes reaching over Euro 2bn in H The Spanish resurgence has been caused by a number of factors but driven by the strengthening of the economies of the major cities. Assets acquired as distressed in the period post financial crisis have now returned to the investment market as opportunistic funds look to crystallise their investments. The change in strategies by a number of Europe s larger hotel groups considering a more asset-light strategy has seen opportunities to acquire sale and leaseback or manage back deals Still remains a shortage of investable stock in UK and Germany with strong demand in both. 8

9 REGIONAL INVESTMENT Regional investment volumes have been affected by the downturn in oil pricing and the potential negative impact on economic sentiment. Sector 7% Changes in dynamics of regional geo-political characteristics is also resulting in some changes in the investment dynamics. During period Q to-date there have been major investment transactions in Dubai office sector with record yield level of 5.8% recorded 19% 14% 33% Investment potentially hampered by high finance costs and restrictive access to debt funding sources. Increase in domestic real estate investment funds and recently listed REITs have added to the capital pools looking to be deployed. Biggest challenge no-one is a seller!!! 27% Retail Industrial Office Residential Hotel / Other 9

10 REGIONAL PERFORMANCE Location UAE Dubai (Palm) UAE Dubai (Prime) UAE Dubai (Other) UAE Abu Dhabi (Main Island) UAE Abu Dhabi ( New ) UAE Fujairah UAE Ras Al Khaimah KSA Riyadh KSA Jeddah KSA Makkah KSA Madinah Egypt Cairo Kuwait Lebanon Beirut Oman Muscat Bahrain Manama REVPAR Y-on-Y Continuing pressure on ADR s and REVPAR within the key Regional markets. Several markets showing increases in visitor numbers and continued visitor confidence Remains a continuing shortage of investable product Strengthening of Sharia a compliant investment vehicles adding to the capital pools looking for compliant investments within the Regions key markets. 10

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