Global Real Estate Outlook Jeremy Kelly Global Research David Green-Morgan Global Capital Markets Research 7 August 2014
Global Real Estate Market Outlook Jeremy Kelly Director, Global Research Jeremy.Kelly@eu.jll.com David Green-Morgan Director, Global Capital Markets Research David.Green-Morgan@ap.jll.com Ben Breslau Head of Americas Research Ben.breslau@am.jll.com Arthur de Haast Lead Director Global Capital Markets Arthur.deHaast@eu.jll.com Tom Carroll Director, Occupier Research Tom.Carroll@eu.jll.com 1
Corporate occupier demand strengthening 2014 Projections of Gross Leasing Volumes Office leasing U.S. +0-5% Highest net absorption of current recovery cycle Europe +5% London and Paris lead recovery in Europe Asia Pacific +15-20% Gross leasing volumes rebounding. Source: JLL, July 2014 but demand remains patchy and recovery in leasing volumes weaker than in previous cycles 2
millions sq m Uptick in construction, but late 2015 before delivery Office Completions, 2008-2015 Office leasing 20 U.S. Europe Asia Pacific 15 10 5 Average Asia Pacific completions 38% higher in 2015 European completions 20% higher in 2014 0 2008 2009 2010 2011 2012 2013 2014 (F) 2015 (F) US construction up 38% 24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the US. Asia relates to Grade A only. Source: JLL, July 2014 3
Development hotspots in each region Office completions 2014-15 as % stock Office leasing Vancouver (6%) Calgary (5%) London (5%) Warsaw (14%) Moscow (14%) Houston (7%) Mexico City (19%) Bogota (23%) Dubai (17%) Delhi (26%) Mumbai (19%) Shanghai (30%) Manila (28%) Santiago (20%) Rio de Janeiro (32%) Sao Paulo (28%) Jakarta (20%) Source: JLL, July 2014 4
Large majority of office markets are in upswing The JLL Property Clocks SM Office leasing Amsterdam Mexico City Moscow Shanghai Berlin Frankfurt Toronto Johannesburg Americas Asia Pacific EMEA San Francisco, Houston Dallas Rental Growth Slowing Rents Falling Sao Paulo London Stockholm, Tokyo, New York Boston Los Angeles, Delhi, Mumbai Rental Growth Accelerating Rents Bottoming Out Warsaw Singapore Istanbul, Beijing Dubai, Chicago, Seoul Hong Kong Prague Brussels, Madrid, Paris CBD, Milan, Sydney, Washington DC Source: JLL, July 2014 Based on rents for Grade A space in CBD or equivalent. This data is based on material/sources 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. Neither Jones Lang LaSalle nor any of its affiliates accept any liability or responsibility for the accuracy or completeness of the information contained herein
Rental Growth for Prime Office Assets Rental change (% y-o-y ) Office leasing 7.6% 8.6% 4.2% 2.2% 1.5% 2010 2011 2012 2013 2014 Prime Office Rental Growth, Unweighted average of 25 major markets. Source: JLL, July 2014
Office leasing Singapore and Tokyo - top office performers in 2014 + 10-20% + 5-10% + 0-5% Rental Values Singapore Dubai, London*, Tokyo Beijing, San Francisco, New York* Boston, Mexico City Stockholm, Hong Kong, Seoul Paris*, Sydney, Frankfurt, Chicago, Los Angeles, Toronto, Washington DC, Shanghai, Madrid, Brussels, Mumbai Capital Values Tokyo, Boston, Chicago Madrid, New York*, Los Angeles San Francisco, Mexico City Dubai, London* Seoul, Sydney, Beijing Frankfurt, Singapore Stockholm, Paris*, Toronto Washington DC, Shanghai, Mumbai Brussels, Hong Kong - 0-5% Moscow - 5-10% Sao Paulo Moscow, Sao Paulo *New York Midtown, London West End, Paris - CBD. Nominal rates in local currency. Source: JLL, July 2014
Industrial Momentum builds in warehousing sector Upward pressure on rents Demand boosted by: Supply Chain Realignment Rental Value growth slowing Rental Values falling E-Commerce Export Recovery Rental Value growth accelerating Rental Values bottoming out US positions relate to the overall market Source: JLL, July 2014 8
Retail Revival, polarisation and consolidation Retail Americas EMEA Asia Pacific United States and European retail sectors maintain recoveries Rise in new shopping centre development in Europe Moscow Paris, Hong Kong, Singapore Berlin, Beijing London Rental Value growth slowing Rental Values falling International retailers target Asia World s largest mall announced in Dubai Tokyo Miami Dubai, Mumbai, San Francisco, Houston Delhi New York, Boston, Washington DC Shanghai Madrid, Milan, Los Angeles Rental Value growth accelerating Rental Values bottoming out Chicago Sydney US positions relate to the overall market Source: JLL, July 2014
Regional divergence as AP slows in H1 Direct Commercial Real Estate Volumes by Region, 2013-2014 Investment $US Billions 14 14 % change 14-14 13 % change 13-14 H1 2013 H1 2014 % change H1 2013-H1 2014 Americas 62 67 9% 52 30% 90 129 44% EMEA 54 59 9% 32 85% 83 113 37% Asia Pacific 23 32 38% 40-21% 59 55-8% TOTAL 139 158 14% 124 28% 232 297 28% Source: JLL 10
Americas & Europe keep the momentum going Direct Commercial Real Estate Volumes by Region, 2007-2014 Investment US$ bn 220 200 180 160 140 120 100 80 60 40 20 0 Source: JLL 07 07 Q3 07 Q4 07 Americas EMEA Asia Pacific Rolling Four Quarters Average 08 08 Q3 08 Q4 08 09 09 Q3 09 Q4 09 10 10 Q3 10 Q4 10 11 11 Q3 11 Q4 11 12 12 Q3 12 Q4 12 13 13 Q3 13 Q4 13 14 14 11
Portfolio deals have a major impact on biggest sectors Transactional Volumes by Sector, H1 2013 & H1 2014 Investment Office 29% Retail 28% Industrial 22% Hotel 39% H1 2014 Mixed 3% H1 2013 Other 38% Source: JLL 0 20 40 60 80 100 120 140 160 US$ bn 12
Europeans finally look outside Net Buying & Selling, H1 2013 & H1 2014 Investment Americas H1 2014 H1 2013 Europe Asia Pacific Middle East Global Source: JLL -5-3 -1 1 3 5 7 9 US$ bn 13
Cross-border competition increases Top 10 Cross-Border Purchasers by Source of Capital, H1 2013 & H1 2014 Investment USA Germany Canada Middle East UK France Singapore China Hong Kong Norway - 1 2 3 4 5 6 7 8 Source: JLL H1 2014 H1 2013 US$ bn 14
Interest spreading beyond the obvious choices Largest Recipients of Cross-Border Investment, H1 2013 & H1 2014 Investment London Paris New York Sydney Tokyo San Francisco Beijing Seoul Melbourne Amsterdam Source: JLL - 1 2 3 4 5 6 7 8 9 H1 2014 H1 2013 US$ bn 15
Plenty of equity ready to be spent Closed-end Private Real Estate Dry Powder, Dec 20013-June 2014 Investment US$ bn 120 North America 100 80 60 Europe 40 20 0 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Jun-14 Asia ROW Source: Preqin 16
Investment Prime Offices Annual Capital Value Change 25 Major Office Locations % pa 25 23.3% 20 15 12.7% 10 7.4% 8.8% 5 3.2% 0 2010 2010 Q3 2010 Q4 2010 2011 2011 Q3 2011 Q4 2011 2012 2012 Q3 2012 Q4 2012 2013 2013 Q3 2013 Q4 2013 2014 2014 Un-weighted average of 25 major office markets across the globe Source: JLL, July 2014 17
US$ billions It s 2006 all over again, US$700 bn for 2014 Direct Commercial Real Estate Volumes by Region, 2006-2014 Investment 800 700 Global 20% Americas 25% 600 500 400 EMEA 15% Asia Pacific 10% 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 (F) c. 20% Projected Change 2013-2014 Source: JLL
Global Markets Outlook 2014 Investment Weight of money trumps monetary tightening 28% growth over the first half reflects increasing equity allocations and debt liquidity Portfolio deals up 30%, continental Europe & Latin America lead the way Big markets dominate, but spread to more countries a key factor $700 billion in sight for 2014, up from US$650 billion Leasing Strengthening markets trigger development cycle Uptick in construction, but pipeline still under control Absorption rising, but still patchy Shortage of Grade A space until 2015 / 2016 Rental growth accelerating (4% in 2014) 19
Questions and Answers Jeremy Kelly Director, Global Research Jeremy.Kelly@eu.jll.com David Green-Morgan Director, Global Capital Markets Research David.Green-Morgan@ap.jll.com Ben Breslau Head of Americas Research Ben.breslau@am.jll.com Arthur de Haast Lead Director Global Capital Markets Arthur.deHaast@eu.jll.com? Director, Occupier Research Tom.Carroll@eu.jll.com Tom Carroll! 20
GMP: A New Dynamic Website Modern, dynamic, easy to navigate website, with a fully optimised mobile version Web-friendly sector summaries A series of 4 data visualisations including: global clock, regional and city comparisons and a new transactions matrix 21