PROPERTY EU EUROPEAN LOGISTICS INVESTMENT BRIEFING RICHARD HOLBERTON, SENIOR DIRECTOR, EMEA RESEARCH, CBRE FEBRUARY 19 TH 2015
AGENDA Economy Market Activity Forecasts Issues
ECONOMY
2014 Some Alarms and Some Deja Vu
Improving Economic Outlook Eurostat Economic Sentiment Indicator Hungary UK Ireland Sweden Czech Republic Germany Portugal EU Average Spain Netherlands Greece Poland Romania Belgium Denmark Italy France Austria Finland Oct-Dec 2014 Oct-Dec 2013-10 -5 0 5 10 15 20 25 difference from the long-run average
Periphery Improving Against Core Eurozone Eurostat Economic Sentiment Indicator 20 10 Ez Core (includes Italy) Northern 0-10 -20 Ez Periphery (includes Spain) -30-40 2006 2007 2008 2009 2010 2011 2012 2013 2014
Eurozone to Lag Behind the Rest Annual average GDP growth 2015-19 Central Europe Ireland UK Spain Germany Nordics Netherlands Eurozone France Russia Italy 0 1 2 3 0 1 2 3 Source: Oxford Economics
Italy UK Germany 2015 2014 Source: Macrobond 2013 2012 10-year Government Bond Yields 8 7 6 5 4 3 2 1 0 2011 2010 2009 2008 2007 2006
MARKET ACTIVITY
WAREHOUSE/ LOGISTICS TAKE-UP, SELECTED Warehouse/Logistics Take-up Selected Locations, (Y on Y % Change) 60% 50% 40% 30% Where?: France; Netherlands; Italy; Poland (& other CEE) Who?: National and international retailers; food manufacturing; pharma; 3PLs and parcel services. Focus on prime 20% 10% 0% -10% -20% -30% 2006 2007 2008 2009 2010 2011 2012 2013 2014
The Demand Dumbbell XXL warehouse platforms in strategic locations Urban logistics & parcel delivery centres 11 CBRE JANUARY 2014
30.0 25.0 20.0 15.0 10.0 5.0 0.0-5.0-10.0-15.0-20.0 Dec-12 Dec-88 Dec-90 Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-14 EMEA Prime Rent Index Y-O-Y Change (%) Retail Index Industrial Index Office Index All Property Index Source: CBRE Research
Commercial Property Investment In Europe Q4 investment turnover close to record level Billion Billion 90 300 80 70 250 60 200 50 40 150 30 100 20 10 50 0 0 CRE Investment 12 Month Rolling Total Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Source: CBRE Research
Industrial & Logistics Investment, Europe, 2003-14 Billion 25 France Germany UK Benelux Nordics Southern Europe CEE Other 20 15 10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: CBRE Research
Property Investment In Europe By Sector 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Q4 2006 Q2 2007 Q4 2007 Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010 Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014 Share of Investment Turnover (%) Source: CBRE Research 15 Office Retail Industrial
FORECASTS
Shoulder To Shoulder?
CBRE EMEA Prime Yield Index Weighted Average Prime Yield (%) Retail Industrial Office 10.0 9.0 8.0 350 bps 200 bps 7.0 6.0 5.0 4.0 Apr-12 Mar-13 Feb-14 Jan-15 Dec-15 Nov-16 Oct-17 Sep-18 Mar-91 Feb-92 Jan-93 Dec-93 Nov-94 Oct-95 Sep-96 Aug-97 Jul-98 Jun-99 May-00 Apr-01 Mar-02 Feb-03 Jan-04 Dec-04 Nov-05 Oct-06 Sep-07 Aug-08 Jul-09 Jun-10 May-11 Source: CBRE Research
Prime Warehouse/Logistics Yields Present yield relative to high and low of current cycle (%) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 London Frankfurt Hamburg Munich Stockholm Amsterdam Rotterdam Manchester Brussels Paris Dublin Warsaw Prague Barcelona Madrid Milan Lisbon Budapest Current yield Cyclical low Cyclical peak Source: CBRE Research
Industrial Yields Outlook London Munich Amsterdam Oslo Paris Brussels Berlin Warsaw Frankfurt Bratislava Hamburg Manchester Prague Helsinki Milan Vienna Madrid Moscow Barcelona Budapest Dublin Yield Shift (BPs) 2015-19 -1.4-1.2-1.0-0.8-0.6-0.4-0.2 0.0 0.2 0.4 0.6 Source: CBRE
Industrial Rental Growth Outlook Oslo Dublin London Moscow Prague Manchester Frankfurt Madrid Milan Warsaw Paris Munich Amsterdam Stockholm Berlin Budapest Bratislava Hamburg Barcelona Brussels Rental Growth % p.a. (2015-19) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 %pa Source: CBRE
Yield Gaps And Rental Growth Prime industrial yield relative to 10-year government bond (%) Q4 2014 Prime Yield 10-year Government Bond 10.0 Spread ERV Growth % p.a. (rhs) 4.5 8.0 4.0 6.0 3.5 3.0 4.0 2.5 2.0 2.0 0.0 1.5 1.0 2.0 0.5 4.0 0.0 London Oslo Manchester Source: CBRE Research, Macrobond Warsaw Stockholm Dublin Berlin Frankfurt Munich Amsterdam Brussels Barcelona Paris Milan Madrid Prague
Industrial Returns Outlook Moscow Dublin Budapest Barcelona Madrid Prague Milan Manchester Bratislava Warsaw Frankfurt Paris Hamburg Brussels Berlin Amsterdam Munich London Oslo Returns % p.a. (2015-19) 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 %pa Source: CBRE
Issues Differences from 2007.. Prime property yields comfortably above long-term interest rates Investment being primarily financed by equity rather than debt And economies and leasing markets (mostly) improving Doesn t mean that there aren t risks Upward yield corrections if occupier market expectations are dented by financial / political events (e.g., Grexit) Some protection for industrial & logistics as its not a growth play, but exchange rates (actual and anticipated) may be more of an issue Pricing : cheap or expensive:? Where next for capital: secondary assets, niche markets.?
PROPERTY EU EUROPEAN LOGISTICS INVESTMENT BRIEFING RICHARD HOLBERTON, SENIOR DIRECTOR, EMEA RESEARCH, CBRE FEBRUARY 19 TH 2015