European Regional Economic Growth Index Introduction to E-REGI

Transcription

1 September 2016

2 European Regional Economic Growth Index Introduction to E-REGI What is E-REGI? Launched in is the 17 th edition of E-REGI Europe-wide coverage - 32 countries European regions - Focus on 100 cities Shows relative economic performance - compared to the European average Strong relationship with real estate - Proxy for occupier demand - Framework for investment LaSalle Investment Management E-REGI

3 Correlation Robust relationship E-REGI and occupier demand 80% Correlation E-REGI Score with Office Take-up in 3 following years 70% 60% 64% 67% 68% 72% 64% 65% 65% 68% Average: 62% 64% 63% 50% 49% 55% 51% 53% 40% 30% 20% 10% 0% E-REGI Year Source: LaSalle (09/16), PMA (09/16), JLL (09/2016) LaSalle Investment Management E-REGI

4 Agenda E-REGI 2016 Methodology 2016 Headline Results Theme 1: Human Capital Theme 2: Politics Conclusions & Discussion LaSalle Investment Management E-REGI

5 Methodology and Headline Results E-REGI 2016 LaSalle Investment Management E-REGI

6 Three categories of economic strength E-REGI methodology 2.50 All European regions (n=295) E-REGI 2016 scores Regions with Strong Scores Regions with Medium Scores Regions with Weak Scores European average = Other Regions Cities with Strong Scores Cities with Medium Scores Cities with Weak Scores Source: LaSalle (09/16) LaSalle Investment Management E-REGI

7 Components of E-REGI scores E-REGI Methodology 60% Growth E-REGI Score 20% Wealth GDP per Capita current 15% 22.5% 22.5% Human Capital: LaSalle s proprietary index 2016 Service Employment: 5 year forecast: growth and absolute 3 year historic growth GDP: 5 year forecast: growth and absolute 3 year historic growth 20% Business Environment Political Stability, Default, Regulatory and Trade Credit Risk, Inclusion in EU/EMU current Source: LaSalle (09/16) LaSalle Investment Management E-REGI

8 2016 Headline results E-REGI London 2. Paris 3. Istanbul 4. Stockholm 5. Luxembourg 6. Oslo 7. Munich 8. Copenhagen-Malmö 9. Stuttgart 10. Zürich 11. Madrid 12. Dublin 13. Gothenburg 14. Geneva 15. Barcelona E-REGI Paris 2. London 3. Stockholm 4. Munich 5. Luxembourg 6. Istanbul 7. Dublin 8. Madrid 9. Stuttgart 10. Oslo 11. Copenhagen-Malmö 12. Zürich 13. Lyon Brussels Barcelona 16. Berlin +19 Source: LaSalle (09/16) LaSalle Investment Management E-REGI

9 2016 Headline results E-REGI Paris 2. London 3. Stockholm 4. Munich 5. Luxembourg 6. Istanbul 7. Dublin 8. Madrid 9. Stuttgart 10. Oslo 11. Copenhagen-Malmö 12. Zürich 13. Lyon 14. Brussels 15. Barcelona 16. Berlin Scores GDP Employment Human Capital Wealth Business Environment Source: LaSalle (09/16) LaSalle Investment Management E-REGI

10 Human Capital E-REGI 2016 LaSalle Investment Management E-REGI

11 Quality of workforce, level of creativity and availability of capital How we measure Human Capital Theme Indicator Variable Data source Weight Skilled Workforce Education level Tertiary Education Attainment Level of population aged years Eurostat 25% Quality of education University Ranking score Center for World University Rankings (CWUR) 15% Creativity Patent production Number of patents filed OECD 20% Agglomeration effect Population density Eurostat 10% Investments R&D Investments R&D expenditure as % GDP Eurostat 20% Tech Venture Capital Investments Venture capital investments in Tech firms Thomson Reuters 10% Source: LaSalle (09/16) LaSalle Investment Management E-REGI

12 Human Capital Score 2016 Most cities perform relatively better on Human Capital Comparison Human Capital Index 2016 vs R&D Paris London Stockholm Munich Stuttgart 2.5 Moscow Berlin Brussels Helsinki Lyon Copenhagen Edinburgh Gothenburg Frankfurt 1.0 Average score Other Regions Cities R&D Score 2015 Source: LaSalle (09/16) LaSalle Investment Management E-REGI

13 100 cities average score reached a record high in 2016 Impact of Human Capital inclusion to E-REGI city scores 1.18 Average Score of the 100 E-REGI cities Source: LaSalle (09/16) LaSalle Investment Management E-REGI

14 Educational attainment level of population aged Presence of the young and well-educated crucial for human capital Zurich-Lyon Corridor Source: LaSalle (2016), Eurostat (2015) LaSalle Investment Management E-REGI

15 Educational attainment level of population aged Presence of the young and well-educated crucial for human capital Germany Source: LaSalle (2016), Eurostat (2015) LaSalle Investment Management E-REGI

16 CWUR evaluates quality of 400 European universities 63% of European regions have at least one university Southern Italy Source: LaSalle (2016), CWUR (2015) LaSalle Investment Management E-REGI

17 Number of patents filed across all sectors A measure of concentration of innovation and creativity in the region South East UK Source: LaSalle (2016), OECD (2016) LaSalle Investment Management E-REGI

18 Population density captures the agglomeration effect Recognizing the transferable element of human capital Frankfurt-Stuttgart Corridor Source: LaSalle (2016), Eurostat (2015) LaSalle Investment Management E-REGI

19 Expenditure in R&D as share of GDP Private and public investments in innovation and research Amsterdam-Brussels Source: LaSalle (2016), Eurostat (2014) LaSalle Investment Management E-REGI

20 Venture Capital Investments in Tech firms Level of investment in the fast-growing tech sector Paris area Source: LaSalle (2016), Thomson Reuters (2016) LaSalle Investment Management E-REGI

21 Losers Winners Winners and losers from Human Capital inclusion in E-REGI Which cities and countries are most affected and why? Main cities affected Key determinants of change UK & Ireland London & Dublin Bristol & Edinburgh Educational attainment Venture capital Benelux Brussels Rotterdam-The Hague Educational attainment Density Russia Moscow St Petersburg Educational attainment R&D expenditure France Paris Lyon Quality of Universities Patents Production Germany Leipzig-Dresden Frankfurt & Nuremberg Educational attainment Venture capital Switzerland Bern Basel-Mulhouse Educational attainment Venture capital Italy Naples & Palermo Turin Educational attainment R&D expenditure Turkey Antalya Izmir Educational attainment R&D expenditure Source: LaSalle (09/16). Note: Information reduced for presentation purposes LaSalle Investment Management E-REGI

22 Productivity and productivity growth now better captured Importance of Human Capital for E-REGI GDP = Productivity * f(investment, Labour) Productivity = GDP / capita Future productivity growth R&D expenditure GDP = Productivity * Human Capital * f(investment, Labour) Source: LaSalle (09/16), Solow (1957), Mankiw, Romer and Weil (1992) LaSalle Investment Management E-REGI

23 Clusters of Human Capital = higher rent and price expectations Importance of Human Capital for real estate strategy Higher Human Capital Higher Rents and Prices Greater Productivity Growth Bigger Urban Clusters Stronger Economic Growth LaSalle Investment Management E-REGI

24 Politics E-REGI 2016 LaSalle Investment Management E-REGI

25 Economic outlook of cities derailed by political events Political decisions explain changes in cities scores 2016 Losers Change in score, 2016 v Source: LaSalle, 2016 LaSalle Investment Management E-REGI

26 Economic outlook of cities derailed by political events Political decisions explain changes in cities scores 2016 Losers Change in score, 2016 v UK cities Source: LaSalle, 2016 LaSalle Investment Management E-REGI

27 LaSalle Investment Management E-REGI

28 E-REGI 2016 Forecast Brexit hit all UK cities Biggest impact comes from weaker employment growth outlook 10% Service sector employment growth E-REGI 2016 v. E-REGI 2015 Bubble size: Service sector employment in 2015 Upgrade 8% 6% 4% 2% Downgrade 0% -2% -2% 0% 2% 4% 6% 8% 10% E-REGI 2015 Forecast Source: Oxford Economics / LaSalle (2016). Excludes Turkish & Russian cities LaSalle Investment Management E-REGI

29 E-REGI 2016 Forecast Brexit hit all UK cities Biggest impact comes from weaker employment growth outlook 10% Service sector employment growth E-REGI 2016 v. E-REGI 2015 Bubble size: Service sector employment in 2015 Upgrade 8% 6% 4% 2% 0% Nottingham -Derby Bristol Leeds Belfast Cardiff Birmingham Sheffield Edinburgh Newcastle Liverpool Glasgow -2% -2% 0% 2% 4% 6% 8% 10% E-REGI 2015 Forecast Manchester London Downgrade Source: Oxford Economics / LaSalle (2016). Excludes Turkish & Russian cities LaSalle Investment Management E-REGI

30 London, Bristol & Manchester remain strong regions UK - Changes in scores and ranks 2016 v Glasgow 79/-8 Edinburgh 50/0 Belfast 86/-5 Newcastle 89/-1 Manchester 57/-40 Liverpool 85/-17 Cardiff 84/-12 Leeds 70/-14 Sheffield 87/-5 Nottingham-Derby 64/-13 Birmingham 62/-25 Source: LaSalle, 2016 Cities name: 2016 Rank / Change in ranking from 2015 Bristol 29/-4 London 2/-1 LaSalle Investment Management E-REGI

31 Economic outlook of cities derailed by political events Political decisions explain changes in cities scores 2016 Losers Change in score, 2016 v Polish cities Source: LaSalle, 2016 LaSalle Investment Management E-REGI

32 LaSalle Investment Management E-REGI

33 Protectionist policies could harm Poland s open economy Weaker GDP growth outlook 8.0% 7.0% 6.0% Polish GDP growth E-REGI 2016 v Warsaw Krakow E-REGI 2016 scores breakdown Polish cities % Poznan 4.0% Katowice 3.0% 2.0% 1.0% 0.0% E-REGI 2016 E-REGI 2015 Wroclaw Tricity (Gdansk) Lodz Szczecin European average GDP Employment Human Capital Wealth Business Environment Source: LaSalle, 2016 LaSalle Investment Management E-REGI

34 Protectionist policies could harm Poland s open economy Weaker GDP growth outlook 8.0% 7.0% 6.0% Polish GDP growth E-REGI 2016 v Warsaw Krakow E-REGI 2016 scores breakdown Polish cities % Poznan 4.0% 3.0% 2.0% 1.0% 0.0% 75 E-REGI 2016 E-REGI 2015 Warsaw E-REGI rank (RHS) Katowice Wroclaw Tricity (Gdansk) Lodz Szczecin European average GDP Employment Human Capital Wealth Business Environment Source: LaSalle, 2016 LaSalle Investment Management E-REGI

35 Economic outlook of cities derailed by political events Political decisions explain changes in cities scores 2016 Losers Change in score, 2016 v Turkish cities Source: LaSalle, 2016 LaSalle Investment Management E-REGI

36 LaSalle Investment Management E-REGI

37 Weakened Rule of Law in Turkey as Erdoğan tightens his grip Lower business environment score in Turkey 1.60 Business Environment Score E-REGI 2016 v. E-REGI Source: LaSalle, 2016 LaSalle Investment Management E-REGI

38 Weaker GDP per capita, but Swiss cities remain very strong Switzerland - Changes in scores and ranks 2016 v % -1% -2% E-REGI 2016 v 2015 GDP per capita -3% CHF / EUR /-5 Basel-Mulhouse Zürich 12/-2-3% -4% -4% 30/-7 Bern -5% /-9 Geneva Source: LaSalle, 2016 Cities name: 2016 Rank / Change in ranking from 2015 LaSalle Investment Management E-REGI

39 Successful policies boosted the scores of German & French cities Stronger employment growth outlook Winners Change in score, 2016 v Source: LaSalle, 2016 LaSalle Investment Management E-REGI

40 Successful policies boosted the scores of German & French cities Stronger employment growth outlook Winners Change in score, 2016 v 2015 French cities Source: LaSalle, 2016 LaSalle Investment Management E-REGI

41 LaSalle Investment Management E-REGI

42 Q Q Q Q Q Q Q Q Q Q Q ILO unemployment rate (%) Private, service sector jobs (million) Government measures have helped create jobs in 2015 Ongoing labour market recovery & increase in corporates profit margins 10.5 ILO unemployment & private service sector jobs France ILO Unemployment rate Private, service sector jobs (RHS) Source: INSEE (09/2016) LaSalle Investment Management E-REGI

43 E-REGI 2016 Forecast French cities benefit from a stronger employment growth outlook Upgrade from a low base 10% Upgrade Service sector employment growth E-REGI 2016 v. E-REGI 2015 Bubble size: Service sector employment in % 6% 4% 2% Downgrade 0% -2% -2% 0% 2% 4% 6% 8% 10% E-REGI 2015 Forecast Source: Oxford Economics / LaSalle (2016). Excludes Turkish & Russian cities LaSalle Investment Management E-REGI

44 E-REGI 2016 Forecast French cities benefit from a stronger employment growth outlook Upgrade from a low base 10% Upgrade Service sector employment growth E-REGI 2016 v. E-REGI 2015 Bubble size: Service sector employment in % 6% Toulouse Nantes Bordeaux Lyon 4% Paris Lille Rouen-Le Havre Strasbourg Marseilles-Nice 2% Downgrade 0% -2% -2% 0% 2% 4% 6% 8% 10% E-REGI 2015 Forecast Source: Oxford Economics / LaSalle (2016). Excludes Turkish & Russian cities LaSalle Investment Management E-REGI

45 Record number of strong French regions France - Changes in scores and ranks 2016 v Rouen-Le Havre 72/+15 Lille 52/+32 Paris 1/+1 Strasbourg 63/ Nantes 42/+20 Basel-Mulhouse 39/-5 Lyon 13/+11 Bordeaux 45/+10 Toulouse 24/+5 Marseilles-Nice 32/+12 Source: LaSalle, 2016 Cities name: 2016 Rank / Change in ranking from 2015 LaSalle Investment Management E-REGI

46 Successful policies boosted the scores of German & French cities Stronger employment growth outlook Winners Change in score, 2016 v 2015 German cities Source: LaSalle, 2016 LaSalle Investment Management E-REGI

47 LaSalle Investment Management E-REGI

48 % Labour force increase driven by women, senior & foreigners Policies aiming at increasing participation rates were successful 80 Employment rate of the working-age population Germany % 69% 59% 59% 57% 57% % 35% 38% % 0 Total working-age population Women Foreigners Source: Bundesagentur für Arbeit (2016) LaSalle Investment Management E-REGI

49 Q Q Q Q Q Q Q Q Q Q Employment rolling annual Minimum wage introduction had no impact on employment growth German labour market shows extra spare capacity 40,000,000 Employment (Jobs + Mini-jobs) Germany Minimum wage introduction 39,000,000 38,000,000 37,000,000 36,000,000 35,000,000 34,000,000 33,000,000 32,000,000 Source: Bundesagentur für Arbeit (2016) LaSalle Investment Management E-REGI

50 Munich, Berlin & Hamburg improving further Germany - Changes in scores and ranks 2016 v Bremen 48/+1 Hannover 55/-1 Hamburg 28/+11 Berlin 16/+19 Bielefeld 68/ Ruhr 59/+4 Düsseldorf 36/+6 Cologne-Bonn 35/-5 Frankfurt 22/-3 Leipzig- Dresden 60/+5 Nuremberg 44/-11 Saarland 78/+8 Mannheim-Karlsruhe 25/-3 Source: LaSalle, 2016 Cities name: 2016 Rank / Change in ranking from 2015 Stuttgart 9/0 Munich 4/+3 LaSalle Investment Management E-REGI

51 E-REGI 2016 Key takeaways Paris takes top spot from London, followed by Stockholm & Munich This year s changes are best explained by: #1 Human Capital highlighting urban agglomeration effect #2 Political decisions determining economic future Brexit puts future of UK cities at risk, but human capital strengths provide cushion French cities improve most due to government policies and new human capital factors Germany s main cities become more successful in creating and filling jobs More political risks looming on the horizon LaSalle Investment Management E-REGI

52 E-REGI Scores Source: LaSalle, 2016 LaSalle Investment Management E-REGI