European Property Investment Markets Sorbonne Immo 13 Juin 2007
European Direct Commercial Property in bn. Euro 250 Investment by sector Office Retail Logistics Others 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 Source: PMA, JLL, DTZ, Catella, CBRE
European Direct Commercial Property Investment in bn. Euro 250 Domestic Cross-border 200 150 100 50 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: PMA, JLL, DTZ, Catella, CBRE
European Direct Commercial Property Investment by country in bn. Euro UK France Germany Benelux Southern Europe Nordic CEE Others 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 Source: PMA, JLL, DTZ, Catella, CBRE
Cross-border investment in Europe Cross-border investment in Europe by investor nationality 2006 3.4% 3.7% 3.8% 4.9% 6.7% 14.4% 4.3% 0.6% 37.8% US / Global UK German Irish French Australian Dutch Canadian Other European Middle Eastern Far Eastern 7.1% 13.3% Source: PMA sample based on investments worth 86 bn
in mio. Euro 20,000 Sale-and-lease back activity picking-up Portfolio sale-and-lease-back where known yield gap in % 2.0% 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0 0.0% 2001 2002 2003 2004 2005 2006 Source: PMA; yield gap = office yields key European Centres minus 5 yr SWAP rates
Growth of non-listed sector Data from INREV database
Prime office yields move in Offices 9.0% CE3 West Europe 11 key German key Nordic Southern Europe UK 8.0% net initial yield in %. 7.0% 6.0% 5.0% 4.0% 3.0% 00 01 01 q2 01 q3 01 02 02 q2 02 q3 02 03 03 q2 03 q3 03 04 04 q2 04 q3 04 05 05 q2 05 q3 05 06 06 q2 06 q3 06 07 Source: PMA, CW, JLL, CBRE
whilst government bond yields move out slightly 10 Prime Offices Real Govt Bonds Nominal Govt Bonds 9 8 7 6 % pa 5 4 3 2 1 0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Source: PMA, OECD, Consensus Forecasts
squeezing the real yield gaps Yield gap of net initial yields vs. 10-year real government bonds 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% Offices Europe key CE UK 1.0% 00 01 01 q2 01 q3 01 02 02 q2 02 q3 02 03 03 q2 03 q3 03 04 04 q2 04 q3 04 05 05 q2 05 q3 05 06 06 q2 06 q3 06 07 Source: PMA, EcoWin
3.0% Yields often below finance costs Net yields minus 5 yr swap rate as at Q1 2007 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% Net initial yields minus 5 year swap rates London: West End London: City Manchester Glasgow Edinburgh Birmingham London: Docklands Madrid: City Dublin Barcelona Paris: CBD Stockholm Copenhagen Paris: La Défense Amsterdam Milan Vienna Paris: WBD Munich: City Frankfurt: City Rome Rotterdam Prague Helsinki Hamburg Dusseldorf Berlin Warsaw Brussels: City Lisbon Budapest Lyon Marseille -2.5% Source: PMA; Haver Margin = 100bp
Prime Market Returns in % pa. 30% 25% 20% 15% 10% 5% Office Property Markets have performed Offices extremely well 10 years 5 years 3 years 3 yr weighted average 14.4% 0% -5% Source: PMA UK Sp CE3 Fra Nordic Neth Ger It
Prime Market Returns, a combination of 25 20 15 Offices Prime Market Returns in % per annum. 10 5 0-5 -10-15 -20 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Source: PMA; average of Western European markets
Capital growth and income return 25 Offices Capital Growth Income return 20 15 in % per annum. 10 5 0-5 -10-15 -20 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Source: PMA; average of Western European markets
Capital growth driven by Offices 25 Capital Growth Rental change Yield shift 20 15 in % per annum. 10 5 0-5 -10-15 -20 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Source: PMA; average of Western European markets
Initial yields / target rate in %. 7 6 5 4 3 2 1 0 How does a 3.75% yield in the West End make sense? Risk free return Volatility Liquidity Transparency Net initial yields Target rate or wealth preservation? 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Source: PMA, CBRE, JLL
Investor intentions passing the peak? Offices only; question on buy hold - sell 70.0 60.0 2005 2006 2007 net responses.. 50.0 40.0 30.0 20.0 10.0 0.0-10.0-20.0-30.0 UK Fra Ger Sp It Neths / Ams Nordic CE3 Source: ULI / PWC Emerging Trends in Europe
Inward yield shift also evident in retail:- (1) prime shops Prime yield, % 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% Budapest Prague Stockholm Paris Milan Madrid Munich London Dublin Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Source: Cushman & Wakefield
7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% (2) and prime shopping centres 2006 Shift 02-05 Shift 05-06 France Spain N'lands Italy Germany Sweden Portugal Greece Hungary Poland Czech Rep UK Source: CBRE
Retail property investment in Europe 2006: UK and Germany dominate France 4% Other 6% Italy 4% E Europe* 5% Spain 6% CE3 6% UK 36% Total estimated investment volume: 48.7 billion Nordic 7% * Incl. Turkey Source: PMA, CBRE Germany 26%
What s being bought and who s buying it? Retail property investment, 2006 Who? What? UK USA Irish German French Dutch Australian Other Nationalities Shopping Centres Big Boxes Store p'folios, units, etc 0 5 10 15 20 25 billion Source: CBRE, PMA
Top retail deals in 2006: corporate / store portfolio transactions dominate Portfolio (PF) / Property Name Country Purchaser Value ( m) Comments KarstadtQuelle PF GER KarstadtQ (DE) / Whitehall Fund (USA) 5,500 Incl. 85 dept & 12 sports stores Printemps PF FRA RREEF (DE) 1,100 70% stake in dept store chain PF of 4 SCs UK The Mall (UK) 798 Sold by Prudential Merry Hill RSC UK Queensland Investment Corp. (AUS) 713 50% stake sold by Westfield Portfolio 4 SCs GER Merrill Lynch (USA) 700 Sold by Brune Tesco PF UK BA Pension Fund (UK) / Tesco (UK) 663 20 year j-v; includes 16 stores PF of RPs UK Hammerson (UK) 627 Acquisition of LXB Covent Garden UK Capital & Counties (UK) 609 Market & surrounding assets Lidl PF GER Babcock & Brown (AUS) 600 182 Lidl stores SC PF POL AXA REIM (FR) 600 49% stake in Apollo-Rida portfolio Source: PMA
What s been bought where? % of investment value2006, retail 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Other Big Box SC/FOCs 0% UK Germany Nordic CE3 Spain Eastern Europe* Italy France Other * Incl. Turkey Source: PMA, CBRE
Europe s biggest retail investment deal in 2007: CentrumKompaniet Portfolio, Stockholm Several bidders for major mall portfolio 10 SCs with ca. ¼ million sqm GLA Sold to Boultbee in May 07 for 1.13bn
Office is the most volatile sector 30.0 25.0 Retail Offices Logistics 20.0 Prime total returns in % pa 15.0 10.0 5.0 0.0-5.0-10.0-15.0 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Source: PMA; average performance in Europe
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