EMEA ViewPoint February 2012
Retail sales stall in Europe over Christmas but online retailing keeps on growing
The ongoing eurozone crisis led to much trepidation about what Christmas 2011 might bring for retailers. In fact, EU-27 retail sales were flat over the festive season, a similar outcome to the previous year, which was neither a resounding success nor as bad as some had feared.
EMEA ViewPoint February 2012
International Capital in London
Central London has always played a pivotal role in crossborder investment both in a European and global context, dominating cross-regional capital flows into Europe because of London’s traditional strengths of transparency, long income flows and particularly liquidity.
With €37.2 billion transacted in 2011, retail maintained a large share of the overall European commercial real estate investment market, growing to just above last-year’s previous record of 32%.
Capital flows into European retail property continue to follow economic performance. Germany and those markets positioned outside of the eurozone – such as the Nordics and some CEE countries - are clear favourites with investors.
Risk-averse investors continue to look for core product with defensive characteristics across the entire retail spectrum.
CBRE Global ViewPoint January 2012
The global view for 2012
Across the economic landscape since the demise of Lehman Brothers in 2008, occasional signs of improvement in the global economies in recent years have contrasted with equally frequent setbacks and new challenges to market stability. With the hindsight of these last few years, the outlook for 2012 appears particularly cloudy, no matter the asset class or industry.
In October, the GOEF sector saw close to €10 million net outflows, with further net disinvestment reported in November. Whilst in itself the €81 million net outflow seen that month was not significant, it is the shift in inflow patterns that posed concerns. Three of the five funds with the strongest net outflows in November were those who have been previously seeing strong net positive results.
The year-end boost to investment activity was particularly noticeable in France, which had an exceptionally strong quarter at c €6.5bn.
More generally, the northern European markets such as the UK, Nordics, France and Germany show increased levels of investment activity in 2011 compared with 2010 while the southern markets, such as Italy and Spain, are suffering from weaker activity this year compared with last. The divide reflects underlying economic sentiment across Europe at present.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
The Four Quadrants MarketView is issued quarterly and it provides a holistic analysis of UK real estate markets. It has been prepared by CBRE Real Estate Finance’s Investment Advisory team.
EMEA ViewPoint December 2011
Uncertainty and change: the new constants for industrial and logistics occupiers
With an uncertain economic environment, there are a number of pressing issues faced by industrial and logistics occupiers in today’s market. CBRE’s ViewPoint titled, ‘Uncertainty And Change: The New Constants For Industrial And Logistics Occupiers’, explores what corporates themselves are saying about the challenges and opportunities ahead.
Global Capital MarketView Q3 2011
Focus on "Stability"
The CBRE Global Office Capital Value Index lost momentum in Q3, increasing only 1.1% during the quarter.
Composition of transaction activity across regions remained roughly consistent: EMEA and the Americas each accounted for 40% of total volume, while Asia Pacific accounted for the remaining 20%.
Canadian investors dedicated more funds to global cross-border transactions during the quarter than to domestic transactions, as reported by RCA.
The preference for prime properties in core markets continued in Q3.
A welcome upturn in market demand this quarter has provided some optimism to total take-up for the year and raised confidence going into the final quarter.
EMEA ViewPoint November 2011
Shifting supply patterns in European office markets
Recent data show that vacancy rates have begun to retreat in serveral office markets as new supply hits cyclical lows. Almost everywhere, this has been accompanied by notable shifts in the quality and geographical distribution of vacant space as occupiers continue to upgrade or move to better located (and still relatively cheaper) premises.
While, in aggregate, values rose slightly in Q3 (+0.2%), there was a distinct performance split, with half the countries measured seeing capital values fall and the other half rising.
The growing uncertainty stemming from the sovereign debt crisis coupled with continually weak economic data are undermining occupiers’ confidence in many markets
Rental growth has lost momentum in the current economic climate, with only Moscow recording robust growth
Supply erosion has halted in London and the vacancy rate rose for the first time in two years
In-line with the trend reported in the overall commercial real estate market, European retail investment grew only marginally in Q3 2011. A total of €7.8 billion was transacted this quarter, a 3% increase over Q2 2011, but significantly below the previous six-quarter average of €9.4 billion.
This reflects a mixed picture in terms of investment activity in individual markets.
France and Italy saw the strongest growth quarter-on-quarter. In Italy this is reflective of a particularly weak Q2, while in France it represents an increased amount of good quality stock entering the Parisian market.
The year-to-date total reached just over €80bn and the full year figure is now expected to exceed the 2010 total.
July was the second consecutive month of positive net investments into the German Open-ended Funds with €181 million reported. However, the sector remains polarised, with a small number of outliers attracting strong net inflows. Funds managed by Commerz Real, Deka Immobilien (including WESTINVEST) and Union Investment, as well as one RREEF-managed fund - grundbesitz europa, saw strong net investment so far this year.
EMEA ViewPoint September 2011
The Real Estate - Bond Yield Gap
The recent (July/August 2011) crisis in the financial markets has driven down yields on certain government bonds. As a result the gap between the yield on real estate and that on government bonds is at an histrorically high level, particularly in the Eurozone. Last time this happened it was a strong buy signal for real estate, but is that the case this time around?
EMEA ViewPoint September 2011
Insurance Sector: The Challenges Ahead
While many European countries have technically emerged from recession, slow economic growth, mounting inflationary pressure coupled with announced fiscal austerity measures have raised questions as to whether the current recovery can be sustained.
There are growing concerns over the potential impact of the current sovereign debt crisis on a fragile economic recovery and, hence, on real estate markets.
The lack of speculative development is creating the conditions for further declines in vacancy. Whether the current downward trend will continue will ultimately depend on the strength of occupier demand.
The gap between prime and secondary properties is widening, both in terms of tenants‘ appeal and rental performance.
Global ViewPoint August 2011
SOVEREIGN DEBT, GLOBAL MARKET VOLATILITY AND COMMERCIAL REAL ESTATE
We have seen extreme volatility in the equity and capital markets in recent weeks, as economic news has been mixed and investors have perceived increased downside risks to global growth. This was accentuated by Standard & Poor’s’ downgrading of U.S. government sovereign debt from AAA to AA+. The downgrade itself served more as a catalyst, unleashing negative sentiment, which has built up over recent months, rather than the fundamental cause.
Retail investment reached €20.1 billion in H1 2011, accounting for 37% of overall commercial real estate investment.
In light of weak economic performance and growing pessimism amongst consumers, the UK saw Q2 2011 retail investment fall to only €2 billion. Investor sentiment followed stronger performing economies instead, such as Germany, the Nordics, Poland and Russia.
Aggressive competition for core assets pushed yields further down and in many core European markets current yields are very close to their 2007 lows. Germany was the only Western European market to see notable yield compression this quarter, along with Poland, Russia and Turkey.
In June, net inflows into the German Open-ended Funds (GOEFs) reached €440 million. This is the second strongest result so far this year, only below the €600 million reported in January.
In 2010, CB Richard Ellis continued to build on its mission to lead the industry in corporate responsibility, achieving several critical milestones. Our fourth annual Corporate Responsibility Report outlines our endeavors and accomplishments in the six core areas of focus that remain the highest priorities for our stakeholders: governance; ethics and compliance; philanthropy; workplace and labor-related performance; health and safety; and environmental stewardship.
The liberalisation and globalisation of trade have resulted in significant changes in the locations from which corporates operate around the world and, indeed, in the international reach of their office presence. This has substantially increased the number of international businesses occupying office space in many markets.
EMEA View Point July 2011
EUROPEAN OFFICE DEVELOPMENT: NO SIGNS OF A RESUMPTION
It is now increasingly evident that the two coming years will see a sharp contraction in new office completions, at a time when most of the schemes started before the market peak have already completed. Latest available figures show that new supply in major European office markets could potentially fall by over 30% in 2011 compared with 2010 and decline further in 2012 asthe low level of starts during the crisis feeds through into lower completions.
The latest results suggest that the German Open-ended Funds are entering a quieter period. €24 million net withdrawals were reported from the sector – a third consecutive quarter of net outflows. However, sentiment is noticeably less negative than was the case in the previous two months, especially March when almost €450 million was withdrawn.
On 17 May 2011, the CoreNet Global UK Chapter held the first in a new series of events, entitled the „Knowledge Exchange‟. This series was developed to discuss and debate timely and relevant hot topics with industry leaders, and drive learning opportunities to the wider CoreNet membership.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
Prime industrial logistics rental growth is being driven by a lack of development in key markets and a return of world trade growth.
An increase in occupier demand is resulting in a return of speculative development in space constrained markets.
Industrial output in Asia will be dampened in the short term by the Great East Japan earthquake, however other Asian markets are expected to increase production to combat such short term affects.
New lease accountancy standards could potentially steer industrial operators towards shorter leases and freehold options.
As of this quarter we have rebased our data centre statistics to show floor area on a net equivalent basis i.e. shell space will now be shown in respect of the net technical (fully-fitted) space that would be created following buildout.
European commercial property value growth remains positive but gradual, reflecting an absence of strong movements in either rents or yields this quarter.
It is also notable that the composition of value growth is shifting - evidence from the first quarter of this year shows that the difference is now narrowing as Europe ex-UK performance improves.
Having fallen the furthest in the downturn, retail values led the way in the European commercial property recovery and have again recorded the strongest growth this quarter (+0.8%).
After positive net inflows reported for the first two months of the year, March saw investor sentiment turn for the worse. The German Open-ended funds reported €448 million net withdrawals in March, the highest net outflows since November last year.
European commercial real estate investment turnover grew to €28 billion in Q1 2011, a higher quarterly total than any of the first three quarters of 2010.
The retail sector is ahead of the rest of the market in terms of recovery and this is expected to continue, supported by institutional investors looking to increase their direct exposure to the sector.
An uplift in the industrial and logistics sector investment was also reported in Q1 2011 to €2.8 billion. This was the sector to see the steepest quarterly yield declines, with the EU-27 Prime Yield Indices falling 8 bps to 7.72%.
European retail investment grew to €12.2 billion this quarter, the highest quarterly total since Q1 2008 and 20% above the five-year average. Having displayed a 4% quarterly rise in activity, retail continues to move ahead of the rest of the commercial real estate market, and is the only market segment to report an increase over Q4 2010.
At €26.7 billion transacted, the Q1 2011 European investment activity reveals both a 26% increase in turnover from the same period last year, as well as a higher quarterly total than any of the first three quarters of 2010.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
Almost €600 million net inflows were reported into the German Open-ended funds in January 2011. As most annual re-investments and financial planning tend to take place in the first month of the year, this means that January net flows haven been consitently positve since the start of our analysis in 2001, with the single exception of 2006.
This is the first issue of Four Quadrants - MarketView. The publication will be issued quarterly and it will provide a holistic analysis of UK real estate markets. It has been prepared by the Investment Advisory team within CB Richard Ellis Real Estate Finance.
Retail investment reached €36.2 billion in 2010, with a further uptick in activity expected in 2011.
The emphasis on risk-averse core investment strategies boosted shopping centre demand. Shopping centres accounted for 40% of European retail investment in 2010, up on the 33% share in 2009.
Influenced by the revival in large deal activity, the average size of retail transaction also increased to €27.6 million, well above the €21.4 million average in 2009.
Corporate real estate disposals have been a growing feature of the European property investment market in recent years, rising from 6% of turnover in 2004 to nearly 20% in 2008. In 2010 occupier sales totalled €14.0 billion, a 12% increase on the €12.5 billion reported in 2009.
This report covers 107 senior lenders with a commercial real estate loan book in the UK. Of these, 69 are actively lending in the UK today
German Pfandbrief lenders continue to dominate the overall market, while UK clearing banks dominate lending activity in regional cities
With the introduction of Basel III, we expect liquidity from all types of lenders (except insurance companies) to decrease, and/or be substantially more expensive
Although commercial real estate and the global economy are covering from the global financial crisis, both are doing so at a disjointed pace, with some regions and property types healing faster than others. For some sub-markets, the wounds will continue to reamin fresh, and the first signs of recovery are just beginning to surface, if at all, in their office development, absorption and leasing markets.
EMEA ViewPoint March 2011
Challenges in disposing of public sector real estate
With many European governments still committed to aggressive deficit-reduction plans, the prospective sale of public sector real estate assets remains firmly on the political agenda. However, the most recent evidence indicates that success in executing sales has been limited. Public sector sales totalled around €1.1 billion in 2010, with over 75% of this in Sweden, Germany and the UK.
EMEA ViewPoint February 2011
Retail Sales Disappoint over Christmas but online Retailing goes from Strength to Strength
As austerity measures kick in across Europe, consumers have become increasingly careful with their money, resulting in flat retail sales during the Christmas trading period.
The European property market grew in value by 2.6% in 2010.
The UK saw the strongest capital growth in 2010 (+8.9%), followed by France (+4.4%), the Nordic region (+3.4%), and Germany (+1.4%).
In common with the annual results, the Q4 quarterly results showed a divergence between regions, with falls continuing in Southern Europe and Ireland (-0.7%) and Benelux / Other (-1.0%). The strongest performer was Germany (+2.4%), followed by France (+1.8%) , the Nordics (+1.3%) , and CEE (+1.2%).
EMEA ViewPoint February 2011
European Logistics: From conflict to constructive collaboration?
The occupational market for modern logistics buildings is undergoing marked changes that will have far-reaching implications for investors, developers and lenders. Occupiers will increasingly pursue flexible accommodation strategies based on building sustainability, and rigorous assessment of the impact of building attributes on operational efficiency. As a result there will be growing demand for transparent pricing metrics capturing the full-life occupation costs of different buildings.
The fourth quarter of 2010 surprised on the upside, with European commercial real estate investment reaching €35.8 billion. By far the highest quarterly result since Q1 2008, this brings the annual investment total to €105 billion.
EMEA ViewPoint January 2011
European Property in 2011: More of the same or something completely different?
With most European economies having begun to recover in 2010, and with real estate investment levels well above their early 2009 lows, some of the ingredients for an acceleration might appear to be in place. However, the pattern of recovery is veryuneven and considerable uncertainty remains about the impact of austerity measures on economic activity and hence occupational demand.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
The global financial crisis and the subsequent economic downturn resulted in significant structural changes to the global real estate market. Three in particular have combined to widen the debt funding gap in the market today:
the fall in property values and returns;
the overexposure of key senior lenders; and
the introduction of the Basel III banking legislation, which has put far more onerous constraints on banks’ appetite and ability to lend.
EMEA View Point January 2011
The new landscape for industrial and logistics occupiers
The recession of 2009 forced industrial and logistics occupiers to scrutinise all elements of their cost base - including real estate - more closely, and consider new ways of shifting occupational terms in their own favour. While economic conditions have since eased, these strands of thinking are still prominent and look set to feature for some time to come. Examples include the adoption of continental-style leases in the UK; more critical analysis of how much flexibility is actually required in the terms of building occupation (and how much to pay for it); the merits of owning rather than leasing properties; and a more rigorous approach to assessing the cost and benefits of new sustainability features.
Strong net outflows were reported in the GOEF sector in both September and October, with €194 million and €353 million withdrawn respectively. This means that almost €700 million was disinvested in the three months since the end of July.
Since the turn of the new millennium, the world’s advanced economies have begun to lose their pre-eminent position of holding a majority share in the world’s markets, and the proportionate share held by the world’s emerging economies has soared. This fact has already begun to impact on how transnational companies position themselves globally, and how and where they place their key personnel and resources to enhance their competitive edge.
EMEA ViewPoint December 2010
The future of lessee accounting
Proposed changes to accounting standards represent a radical shake-up of accounting for leases. Under these new measures all lease obligations will be capitalised on the balance sheet. These proposals, if implemented, will have a profound impact on every company that is a user of real estate.
Not a week goes by without another commentary on the wall of real estate refinancing that is required in the next few years. This is not without good reason: CB Richard Ellis estimates total European commercial real estate debt to be €960bn, but the problem is particularly striking in the CMBS sector. Whilst balance sheet lenders can take the asset in-house to work it out, Loan Servicers of CMBS don’t have this luxury and face much starker choices keeping a multitude of bondholders in different tranches with conflicting priorities happy. Extensions alone are not the answer and the needs of the underlying real estate (both in terms of capital injection and management expertise) must be the top priority in any workout strategy.
As economic sentiment has picked up in most regions across the globe, levels of occupier demand are starting to show signs of improvement. More companies are looking to expand and net absorption is positive in a number of markets this quarter including Hong Kong, Washington D.C and London’s City and West End. There are still concerns over high unemployment forecasts, particularly in Spain, but this is true of fewer markets than before.
Commercial real estate investment turnover reached €23.1 billion in Q3 2010, a slight decline on the €24.6 billion reported in the previous quarter.
Investor demand remains heavily concentrated at the prime end of the market, a trend that we expect to continue in the mid-term.
The lending market is starting to see the first signs of freeing up, with more syndicate deals being initiated and alternative lenders, such as insurance companies becoming more active.
In countries where sovereign debt has been downgraded - such as Spain – lending terms have become stricter and margins increased.
Several indicators show the cycle stabilising, although continued problems in European economies are likely to restrain recovery phase.
Growing polarisation between prime and secondary space - in terms of demand and rents - is a key feature of the current market.
Take-up characterised by continued corporate consolidation and occasional banner transactions: rental recovery will need more broad-based demand momentum.
Global Office Rents Market View: Rents November 2010
As measured by headline GDP, the global recovery continues to take hold - albeit at a more moderate pace - as we move through 2H 2010. In 3Q, the world's economic output grew at a pace of 2.3% on ana annualized basis. By comparison, economic growth has averaged 3.8% since the recovery began in 2Q 2009.
Following negative outflows in May as a response to an unease over government proposals suggested as part of GOEF reform, investor sentiment towards the sector improved markedly in the summer months. Net inflows turned positive again, with €250 million and €601 million net investment reported in June and July respectively.
Retail investment increased to €15.7 billion in H1 2010, with investor demand expected to remain strong into H2 2010.
The level of cross-border investment increased significantly to 40% of the market in H1 2010. Germany, France and Poland benefited most from this revival.
Reflecting growing liquidity for large lot sizes, the average lot size increased to €27.5 million. We expect core shopping centres to be the most popular segment of the market in the near term.
Commercial real estate investment turnover reached nearly €46 billion in H1 2010, continuing the improvement in activity.
Cross-border investment reached 35% of total activity in H1 2010, up from 33% in H2 2009. European investors, German and Dutch, are most active, but there is growing investment from the Middle and Far East.
Yields continue to fall, but the rate of decline is slowing. The outlook appears to be for a period of stability in pricing.
Austerity is the economic theme of the moment, as the crisis in the Eurozone throws greater attention on the level of government deficits and accelerates the need for them to bring these deficits under control. Left to themselves, governments would have preferred much slower reductions. However, the bond market has forced their hands by refusing to fund some countries’ high deficits except at very penal interest rates.
EMEA ViewPoint July 2010
The Role of Corporate Real Estate in Mergers and Acquisitions
The number of mergers and acquisitions being announced is increasing, as stronger companies look to take advantage of the current economic climate by acquiring weaker rivals. No two such transactions are the same, but real estate is almost always an important part of the merger process.
The second quarter saw €23.5 billion transacted in the European investment market, a 15% increase on the €20.3 billion reported in Q1 2010. This is despite the stress factors emerging in the broader capital markets, such as the sovereign debt crisis and the introduction of austerity measures by many European governments.
The May data from BVI reveals the extent of the impact of government proposals for reform of the GOEF sector. Although the very strong inflows from the start of the year had already been moderating, May saw this turn into substantial withdrawals totalling €1.44 billion.
This report ist designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
EMEA View Point July 2010
What role for property sales in government deficit-reduction programmes?
With many European governments having announced aggressive deficit-reduction plans, the motive to dispose of government-owned real estate assets remains strong. Several countries had existing commitments to disposal programmes and, although asset sales by governments totalled under €1bn last year, the need to bring deficits under control will have reinforced their intentions.
EMEA View Point July 2010
A new Office Development Cycle? Not yet
Some recent indicators have suggested a measure of improvement in the European office markets: rents have stabilised, vacancy rates are peaking at lower levels than in some previous cycles and leasing volumes have risen from their mid-2009 lows. This raises the question as to whether these are the early precursors of the next development cycle.
Following a challenging 2009 in the European data centre market, the first quarter of 2010 has shown encouraging signs. Whilst we do not expect the market to return to its stellar levels of 2007/8 in the short term, it is reassuring to see that there is a steady flow of transactions – particularly in the Retail Colocation sector.
EMEA View Point June 2010
Yield and pricing patterns in the european logistics market
While downward yield movements and investment turnover growth have been relatively modest in the European logistics market over the past year, longer-term changes in the sector’s investment characteristics have established a different, and lower, yield regime over the past ten years than was observed previously.
The April net inflows data released in the second week of June was in-line with general expectations: much weaker than the net inflows reported earlier in the year, although still surprisingly a net positive €79 million. Overall, the GOEF sector is under increasing pressure as investor withdrawals continue.
The global economic recovery as measured by GDP started in mid-2009, and continued in 4Q 2009 when GDP grew at 4% on an annual basis. In 1Q 2010, global growth has moderated to a pace of 3%.
This is a new report based on quarterly fund valuations carried out by CB Richard Ellis and designed to enhance transparency by providing a general indication of patterns of value change in the European property market.
Economic recovery across Europe remains patchy, and more severe austerity measures will need to be implemented in some countries. For now, office demand is mostly being driven by corporate rationalisation and consolidation.
Stable headline rents secured by significant incentive packages still on offer in many markets. Incentives expected to fall as market strengthens this year.
Although development starts remain low, reactivation of schemes will be a key issue to monitor over the remainder of the year.
March net inflows into the German Open-ended Funds reached almost €535 million. This was a positive result, bringing the Q1 2010 net inflows to a total of €3.2 billion. More or less the same funds featured with the highest net inflows this year so far. Most notably, RREEF’s Grundbesitz-global, having seen the highest net inflows in each of the three months, attracted over €761 million of new investment.
Our central expectation is for the European investment market to reach €110 billion in 2010. This is a significant increase on €73 billion reported in 2009.
Corporate sale-and-leasebacks, particularly by financial institutions, continued into 2010. These featured strongly amongst Q1’s largest transactions.
The downward trend in yields continued. The CB Richard Ellis All Property Average Prime Yield fell to 6.03% - a level comparable to that in early 2005.
After the rapid growth in turnover in the commercial real estate investment market in Q4 2009, with investors pushing to get transactions completed by the year end, it was expected that turnover would fall back somewhat in the first quarter of 2010.
European commercial real estate investment reached €19.1 billion in Q1 2010, 65% above the Q1 2009 level, confirming the general recovery in investment activity that began in the latter part of 2009. As expected, the Q1 figures show a marked decline on Q4 2009. The last few months of the year are traditionally the most active, with investors pushing transactions through to complete them by the year-end.
February net inflows into the German Openended Funds amounted to €977 million, extending January’s positive news. A total of €2.7 billion net inflows have been reported into the sector in the first two months of 2010.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
In the CMBS industry at the moment the focus seems to centre on the role of the Special Servicer. These are the people who come in like fire fighters to deal with a problem once it has burst into flames. The poor relation of the industry is the Primary Servicer and yet his role is crucial to the future success of the CMBS market. In fact, if the Primary Servicer is effective he may even be able to prevent the Special Servicer Transfer Event which would activate the Special Servicer’s appointment. An ounce of prevention is worth a pound of cure, and for investors it is clearly more prudent to head off a disaster beforehand than to deal with it after it occurs.
This is a new report based onquarterly fund valuations carried out by CB Richard Ellis and designed to enhance transparency by providing a general indication of patterns of value change in the European property market. There are various existing measures of European property market performance, including CB Richard Ellis' own prime rent, yield and capital value indices, each withits own sample base and methodology.
EMEA ViewPoint March 2010
European Investor Intentions for 2010
In early March 2010, over 270 people from across the European property investment community responded to our online survey asking them to answer six simple questions regarding the prospects for real estate investment. In each case, investors were given a series of options and were asked to select just one response. Whilst obviously not capturing the full depth and complexity of investor views, the results highlight some interesting similarities – and differences – of opinion about the prospects for the market and potential threats to the emerging recovery.
EMEA ViewPoint Q1 2010
The Sovereign Debt Crisis and Real Estate
The turmoil in the government bond markets in recent weeks has captured a great deal of attention. However, beyond the political and economic fallout of the Greek debt crisis, real estate investors will want to know what the implications are for their sector.
The Continental European commercial real estate (CRE) debt market as a whole is facing very similar problems to those already identified in the UK. The internationalisation of investment and lending in 2005-2007 led to convergence across the European debt markets, as well as real estate investment. Across Europe there is, therefore, a large legacy of problem debt, with a significant build-up of maturities over the next three years.
In January the German Open-ended Funds reported €1.7 billion net inflows. Whilst a generally encouraging result, it is typical for the sector to have high net inflows in January due to annual financial planning and dividend reinvestment.
The global recession hit hard and fast in 2009, with few countries escaping the impact of the financial crisis. Even Asia Pacific, which continued to post positive economic growth in 2009, experienced a significant slowdown. The outlook for 2010 is far more optimistic (though from a low base) and, led by Asia and particularly China the global economy is expected to grow 3% this year. However, the pattern of recovery is varied; the mature economies are expected to expand by around 2%, with the weakest growth in Europe.
EMEA ViewPoint February 2010
Changing occupation strategies in the legal sector
Major legal practices are changing the way in which they occupy office space. Historically viewed as having a very “traditional” approach to office layouts, with a high proportion of cellular offices, many practices are introducing more modern, open plan environments.
The total value of investment transactions fell 40% year-on-year to €73 billion, although a strong final quarter suggests 2010 will be much better.
Most aspects of the market saw a much stronger H2. Prime yields fell sharply, although for more secondary property prices are generally stable at best.
The level of cross-border activity has yet to increase markedly. Although it is clear that there are plenty of foreign investors with an interest in the European market, so far this has yet to translate into a higher proportion of transactions.
At €631 million, December net inflows into the German Open-ended Funds were strong, bringing the year’s total to €3.21 billion. Whilst the year-end results were encouraging, their release coincided with some negative developments in the market.
The third quarter of 2009 in the European Carrier Neutral Hotel (CNH) market has shown an encouraging improvement compared with the first half of the year. Take-up across the five Tier 1 data centre markets this quarter was 18,190 m², an increase of 730 m² on the first two quarters of the year combined.
EMEA View Point January 2010
Emerging Challenges for Industrial and Logistics Occupiers
Faced with recessionary conditions in most geographies, occupiers of industrial and logistics buildings have had to take steps to reduce their cost base. This doesn’t automatically skew demand towards cheaper space, mainly because the quality radient is unacceptably steep.
European commercial real estate investment grew to €25.7 billion in Q4 2009, a 42% increase on Q3 2009. This is the highest quarterly total since the Lehman’s collapse – and a confirmation that the upturn in investor interest, that started across major markets in mid 2009, has now spread further afield.
There were widespread falls in prime yields across Europe in the final quarter of last year. The UK continues to stand out as the focus of the largest movements in yield, but many of the major European centres are now seeing yields moving down, particularly in the office sector.
EMEA View Point January 2010
After the Storm: Where next for European Property?
Having come through a period of steep decline in early 2009, most European economies have begun to record positive quarter-on-quarter growth again as a result of near-zero interest rates and, in some cases, large-scale government intervention. Most commentators are anticipating slow, but positive, economic growth in 2010.
November net inflows into the German Open-ended Funds were reported at just under €65 million. Although this is quite low, it is a substantial improvement on the €660 million net redemptions reported in October.
EMEA View Point December 2009
The Changing European Development Cycle
One of the ways in which the credit crunch and recession have affected the real estate sector has been to cause a sharp reduction in the scale of development activity in most of the main European office markets. Severe restrictions in the availability of development finance, coupled with weak tenant demand and falling values, have resulted in a 4.5% drop since the end of last year in expected office completions over the two years 2009-10.
Many economic indicators are showing positive signs. GDP turned the corner in 3Q 2009 for many countries including both Japan and the U.S., which grew by 4.8% and 3.5% respectively; quarter-over-quarter, annualized. Financial markets have stabilized and credit conditions have begun to ease, resulting in the narrowing of corporate bond spreads.
After a couple of months of positive inflows, October net inflows into the German Open-ended Funds turned negative again. Total net redemptions amounted to €660, making it the weakest month this year so far. To a great extent this is due to activity at iii-managed funds.
European retail investment grew to over €5 billion in Q3 2009, a quarterly increase of 18%. In contrast to the 34% jump in activity across the market as a whole, the upturn in retail activity has been less pronounced; although equally it had been shallower on the downside.
September net inflows into the German open-ended funds reached €81 million. This muted result comes on the anniversary of the Lehmans collapse, which triggered major outflows, with many funds forced to close to redemptions during October 2008.
Improved market sentiment resulted in an upturn in the European commercial real estate investment market in Q3. Activity totaled €17.3 billion, an increase of 34% on Q2 2008.
Following the reopening of a number of funds during the summer months, the August BVI data reported sector net inflows at a positive €326 million. This is a very encouraging result after the net withdrawals of over €400 million in July, due to one-off redemptions from the newly reopened CS EUROREAL and KanAm grundinvest Fonds.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
Following on from a weak first quarter of 2009 in the European Data Centre market, we have witnessed a further decline in take-up in Quarter 2. This demonstrates that the start of the year was not merely an anomaly and that the wider economic downturn has finally had an impact on data centre take-up.
In contrast to the previous few months, the German Open-ended Funds reported strong net outflows in July. Total net redemptions amounted to almost €440 million, making it the weakest month since November last year.
European economies still contracting:
Most European countries are expected to see a contraction of between 2% and 5% over 2009 as a whole as they fall further into recession. The European Union is expected to see a contraction of around 4% in 2009 compared to the 2.6% expected by the US.
Investment activity was low in H1 2009, at just €25 billion, but showed some signs of recovery towards the end of that period, with higher levels of investor interest and activity.
The UK and Spain appear to be at the forefront of the recovery in market activity, with investors spotting value in the substantial repricing that these markets have seen.
Cross-border activity is at a relatively low level and is primarily intra-region. With US investors largely absent from the market German, Irish and British investors accounted for nearly half the cross-border investment in H1 2009.
June was another strong month for investment in the German open-ended property funds, with positive net inflow of €867 million. This brings the year to date total to €3.15 billion and the sector has now almost reversed the huge cash outflows it suffered in October last year.
In terms of availability and take-up, the market has now started to reflect the economic environment. The office space currently available mainly consists of smaller units. This can be traced back to the fact that an increasing number of tenants have started to sublease or to downsize their office space.
Landlords used to hold on to high asking rents for a long time. However, lease negotiations are more and more characterized by reasonable rent allowances to tenants.
Die EZB hat in den letzten Monaten durch Zinssenkungen, Ausweitung des Geldangebots und durch direkten Eingriff in die Kapitalmärkte – das so genannte Quantitative Easing – zu einer spürbaren Verbesserung des Refinanzierungsumfeldes beigetragen. Neben den allgemeinen Kapitalmarktkonditionen möchten wir in dieser Ausgabe auch ein kurzen Blick auf die Refinanzierungsrisiken aus verbrieften gewerblichen Immobiliendarlehen (CMBS) werfen.
The European commercial real estate investment market saw a slight upturn during the second quarter of the year with turnover reaching € 13 billion. This represents a 12% increase from the € 11.6 billion transacted in Q1 2009, but a 37% decline compared with Q4 2008.
The first quarter of 2009 has seen a significant decline in take-up in the European data centre market. Overall take-up for Quarter 1 was 11,020 m², the lowest quarter recorded since Quarter 2 2006 and the lowest first quarter since our statistics began.
Sentiment towards the German Openended Funds sector continues to be upbeat, with the re-opening of CS EUROREAL on 1st July and the BVI reporting May net inflows close to €700 million. This brings the yearto-date inflows to €2.28 billion, an encouraging result for the sector as a whole, and in particular for the eight remaining ‘closed’ funds.
Unexpectedly, May 2009 turned out to be an eventful month for the German Openended Fund sector. The reopening of SEB ImmoInvest fund came as a surprise to many, despite an earlier announcement highlighting their intentions to do so. It is the third fund to reopen since the mass redemptions forced 12 of the 46 funds into temporary closures in October 2008.
Following a sharp contraction of worldwide economic activity in Q4 2008, the commercial real estate market turned in a negative performance in Q1 2009. The depth and speed of the decline varied across markets and regions, but the direction was the same. CBRE’s quarterly Global MarketView analyzes global economic trends and their impact on commercial real estate. Looking ahead, we expect the remainder of 2009 to be extremely challenging.
The foundation of the global economy has been tested to a degree not seen since the Great Depression. What began as a U.S. housing crisis quickly became a worldwide financial crisis.
Deutschland stellt hinsichtlich der Wirtschaftskraft und der absoluten Bevölkerungszahl die größte Volkswirtschaft innerhalb der EU dar und ist im internationalen Vergleich überdurchschnittlich industrialisiert. Darüber hinaus war Deutschland 2008 zum wiederholten Male Exportweltmeister. Im europäischen Vergleich nimmt Deutschland eine zentrale Rolle im Logistiksektor ein und ist aufgrund der geografischen Lage, der gut ausgebauten Infrastruktur und einem relativ moderaten Mietniveau im Vergleich zu anderen EU-Ländern sehr attraktiv.
Die unmittelbaren Auswirkungen der Rezession haben in Deutschland mittlerweile deutliche Spuren im realwirtschaftlichen Sektor hinterlassen. Diese Entwicklung machte auch vor den Toren Münchens nicht Halt. Waren zu Beginn der Krise noch vorwiegend Unternehmen aus dem Finanzsegment betroffen, so wurden durch den sukzessiven Konjunkturabschwung inzwischen nahezu alle Branchen in Mitleidenschaft gezogen. In München ist zwar langfristig davon auszugehen, dass die Stadt nachhaltig von ihren Standortprivilegien wie der überdurchschnittlichen Kaufkraft (Index 136,8) sowie besten Bildungs-, Lebens- und Arbeitsbedingungen profitieren wird, die zurückhaltenden Wirtschaftsprognosen für Gesamtdeutschland trüben aber den Blick auf die nahe Zukunft ein.
2007/2008 lag der Umsatz auf Rekordniveau – nun Rückkehr zur Normalität: Umsatzvolumen liegt im ersten Quartal bei 45.300 m² (- 28 %). Der Flächenumsatz wird sich weiterhin auf diesem zwar geringeren, jedoch bei langfristiger Betrachtung „normaleren“ Niveau einpendeln
Economic downturn begins to bite: The impacts of the credit crunch and subsequent economic downturn are now clearly feeding through into the retail sector. Consumer and retailer confidence is weak and retail rents are now also generally in decline.
Investment market turnover fell to €11.3 billion, the weakest European quarterly activity level in the last five years
Capital Values continued to decline across all sectors. At the end of Q1 2009 the year-on-year falls in EU-27 Indices were around 20% for all three sectors
The economic outlook continues to weaken across all of the European markets, muting the outlook for occupier markets. The next stage in capital value declines will be mainly driven by rental falls.
As expected, the European commercial real estate investment market continued to see a fall in turnover, with activity in the first quarter of 2009, totaling € 11.5 billion. This level of activity marks a sharp decline from the value of transactions completed in Q4 2008 (which saw market activity of € 20.6 billion) and reflects the impact of the Lehman’s collapse on investor sentiment.
The latest BVI results posted positive net inflows into the German Open-ended Funds, with €271 million invested in March. This brings the year-to-date total to just over €1 billion, which contrasts with substantial outflows from most other Publikumsfonds, such as equity, bond and money market funds. However, the comparison is slightly skewed as ten out of the 46 open-ended funds, making up almost a third of the GOEF sector by value, remain temporarily closed to redemptions.
EMEA ViewPoint
Are property market adjustments getting faster?
The current downturn has been described as the first recession of the globalised age. The world economic system is now characterised by rapid, almost instantaneous, information transmission within and between national economies that are ever more closely interconnected. Price inefficiencies and anomalies should therefore be more readily identifiable and likely to be traded away quickly.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
During the course of 2008, carrier neutral colocation operators continued their growth plans through expanding existing sites, building out undeveloped properties and announcing intentions to develop new schemes. All of the five largest European players showed an appetite for continuing to develop floorspace in established markets, underpinning the positive sentiment towards the health of the colocation industry and the favourable balance seen between supply and demand of European technical floorspace.
After two months of positive net inflows, the February results slipped into negative territory, with -€33 million net withdrawals reported from the German Open-ended Fund industry. Whilst January results tend to be positive due to reinvestments taking place that month, February’s outflows highlight the fact that, in common with other investors, GOEFs too face challenges in the current market climate.
Who pays for green?
The Economics of Sustainable Buildings - EMEA Research 2009
The prominent role of real estate is increasingly recognised in the wider debate on climate change. A significant proportion of carbon emissions come from commercial and residential buildings, and legislation at national and European levels is driving changes to building specifications in an attempt to address this.
EMEA View-Point March 2009
European Property: Back to Basics?
The European real estate market is clearly in a period of significant change. The financial engineering, high levels of gearing and yield compression that were such a feature of previous years are now a thing of the past. Instead, investors will be focussing on long-term performance and the more conventional ways of generating returns: buying quality buildings in good locations that benefit from strong occupier demand and rental growth; and adding value to investments through active management of the physical property and its tenancy characteristics.
Having seen positive net inflows of €861 million in December 2008, the €789 million reported in January was a reassuring message for the German Openended Funds.
Düsseldorf - die Schöne am Rhein, als Messe- und Modestadt in der internationalen Modebranche bekannt, besticht sie vor allem durch ihre städtebauliche Kompaktheit, ihr kaufkräftiges Publikum aus Stadt und Umland und nicht zuletzt durch die Königsallee, liebevoll auch "Die Kö" genannt, als das Aushängeschild für das internationale Luxussegment in Nordrhein-Westfalen.
München ist die Primadonna aller deutschen Einzelhandelsstädte - sehr schön anzuschauen, aber auch kompliziert und teuer. Keine andere Stadt bietet in Deutschland eine solche Breite und Tiefe im Einzelhandelsangebot für die wohlhabende Bevölkerung Münchens und Umgebung sowie die nationalen und internationalen Touristen.
Frankfurt zählt mit seinen rund 657.000 Einwohnern zu den größten und wirtschaftskräftigsten Städten Deutschlands. Als Metropole im Rhein-Main-Gebiet (ca. 5,3 Millionen Menschen) ist Frankfurt vor allem Business- und Messestadt.
Das Motto der Stadt "Hamburg - Die wachsende Stadt" ist nicht nur ein Slogan, sondern ein klarer, empirisch nachweisbarer Trend - der sich über mehr als das bloße Einwohnerwachstum definiert.
Retail investment market turnover fell by 45% year-on-year. Activity was lower nearly everywhere, although Russia, Netherlands and Denmark did see increased turnover.
Average deal size fell to €31 million and almost 87% of all deals in 2008 were for less than €50 million. However, the retail sector did see two of the largest deals in Europe in 2008.
Cross-border investment fell to 51% of the market. However, the proportion of cross-border activity in the shopping centre sector stayed at 66%.
Investment market turnover fell by 53% year-on-year. Activity was lower in all markets, with the only exception being Russia where it was on a par with that in 2007.
Average deal size fell to €29 million and almost 87% of all deals in 2008 were for less than €50 million. Only four deals over €1 billion were completed in 2008.
Cross-border investment fell to 44% of the market. German, American and British investors remained the top three most active international buyers in 2008, but in value terms American activity fell very sharply.
With economic conditions deteriorating across Europe, demand is softening, with large-unit requirements especially fragile
There is clearer evidence of downward pressure on rents – this will progressively take over from yield shifts as the key influence on values
Core districts remain supplyconstrained in some markets, but occupiers are now showing greater locational flexibility
Credit conditions remain tight despite widespread government intervention. The resulting lack of new development starts will constrain supply growth in the medium term
Beginning with the U.S. sub-prime dislocation in the summer of 2007, market conditions deteriorated into a severe global credit crisis, which effectively shut down the global economy in the fourth quarter of 2008.
There was a positive end to 2008 for the German Open-ended Funds, with BVI results posting €861 million net inflows into the sector for December. This is higher than the net inflows reported back in both December 2006 and 2007, when investor sentiment towards the GOEFs was very strong.
For the majority of multi-asset investors commercial real estate forms a relatively small part of their portfolio. The vast majority tends to be concentrated in bonds (both government and corporate) and equities. However, the credit crunch and subsequent economic recession have had a dramatic affect on asset values in all sectors. Therefore as they look forward asset allocators will be considering what distribution of assets will produce the best results.
We witnessed a high level of take up in the first three quarters of 2008 with the data centre market performing beyond our expectations and reaching 93,000 sq m (1.0 million sq ft) across the five tier 1 markets.
Net outflows of -€721 million were reported in November, bringing the year-to-date net inflows into the negative territory;
Ironically it was the funds that are ‘temporarily closed to redemptions’ who registered positive net inflows in November. This was due to continuous flows of money from monthly payment plans;
KanAm grundinvest Fonds was the first fund to announce a one-off revaluation of its entire portfolio. It is now a matter of time to see if other fund managers follow suit;
GOEFs stayed active in the investment market: AXA, DEKA, CGI and Union Investment were particularly active buyers over the last two months of the year.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter.
The net cash outflows from the German Open-ended Funds in October reached -€5.06 billion. In light of 12 funds closures to redemptions in the last week of October such outcome was expected.
Global Market View Office Occupancy Costs November 2008
The average rate of growth for office occupancy costs among the 172 markets monitored in the survey was 8%, almost double last year’s world inflation rate. Up 94.6%, Abu Dhabi, United Arab Emirates (UAE) had by far the fastest growing occupancy costs, with three of the top five fastest growing countries situated in the Middle East.
Retail investment activity in Europe totalled €6.2 billion in Q3 2008, a decline of 12% relative to the previous quarter. This was in slight contrast to the overall commercial real estate market, where Q3 turnover was broadly equal to Q2 levels.
The National Statistical Office announced year-on-year (y-o-y) GDP growth of 7.6% in Q2 2008. This is in line with consistent GDP growth in the last few years, which has resulted in Slovakia having one of the highest GDP growth rates in Europe. GDP growth has been, in part, supported by increased spending, while increases to wages have slightly outstripped increases in production output, and further decreasing unemployment has also facilitated this.
The latest BVI data shows that the net cashflows to the German Open-ended Funds in September were -€238 million, the first negative total since October 2007.
Austria