Invest NW: Michael King, GVA

Date MonthDate Month

gva.co.uk

A Bilfinger Real Estatecompany

Property Market Overview

13 October 2014

Michael King FRICS, Senior Director

gva.co.ukShort presentation title here / November 2010

The Macro Picture & Trends

Place North West – 13 October 2014


Values – where are we now?- All property capital values are 29% below 2007 peak but 26% above 2009 low. Rental values are now rising modestly.

Source: IPD, GVA


Nov-03

May

-04

Nov-04

May

-05

Nov-05

May

-06

Nov-06

May

-07

Nov-07

May

-08

Nov-08

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-09

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-10

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Nov-11

May

-12

Nov-12

May

-13

Nov-13

May

-14

40

60

80

100

120

140

160

180

Capital Values Rental Values

Ind

ex

, No

ve

mb

er

20

13

=1

00


Yields & Interest Rates

0

1

2

3

4

5

6

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8

9

%

IPD Initial Yield 5-yr Swap Rate 5-15 Year Gilt Yields



4

5

6

7

8

9

10

11

12

13

14

Yie

ld (%

)

Lowest yield quartile ('prime') UK average Highest yield quartile ('secondary') UK average

200 basis points

499 basis points

Source: IPD, GVA

Prime vs secondary yields- The gap between all property prime and secondary property yields has widened significantly, but is now starting to narrow.

562 basis points



Development activity - Dramatic fall in new commercial development - worse than in each of the last two recessions. Recent improvement is the start of expected strong upturn in activity.

Source: ONS, GVA



-30

-20

-10

0

10

20

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Annu

al C

hang

e (%

)

Total Returns Capital Value Growth

Property returns & capital value growth- Outlook is for a 20% total return and 14% capital value growth in 2014.

Source: IPD, REFL, GVA



Net Investment by Type of Buyer

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

2006 2007 2008 2009 2010 2011 2012 2013

£b

n

UK Institutions Quoted Prop Co Private Prop Co Overseas Investors

Private Individuals Corporate Others



The Office Sector



Office Rental Growth

-20

-15

-10

-5

0

5

10

15

20

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018% p

a

All Property Central London Offices NW Offices



Example Transactions - Offices

Overview of the UK Commercial Property Investment Market

Chancery Place, ManchesterVendor: Private InvestorPurchaser: NFU MutualPrice: £57,000,000Yield: 5.05% NIYComment:

• 106,000 sq ft • Multi let• 2 vacant floors on

rental guarantees• £537 per sq ft



Example Transactions - Offices


Ship Canal House, Manchester

Vendor: HIMORPurchaser: Ardstone CapitalPrice: £26,000,000Yield: 6.25% NIYComment:

• 72,544 sq ft • Multi let• 2 vacant floors• £358 per sq ft



The Retail Sector



In-town Retail Rental Growth

-8

-6

-4

-2

0

2

4

6

8

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018% p

a

All Property Unit Shops Shopping Centres NW Unit Shops



Out-of-town Retail Rental Growth

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

% p

a

All Property Retail Warehouse



Example Transactions - Retail In Town


7-9 Piccadilly, ManchesterVendor: W K Nolan AssociatesPurchaser: Henderson Global

InvestorsPrice: £8,200,000Yield: 6.34% NIYComment:

• 22,000 sq ft• Overriding lease to

Superdrug Stores• Expiry 2022



Example Transactions - Retail In Town


17-19 Church Street, Liverpool

Vendor: Friends Life (AXA)Purchaser: Vabeld LimitedPrice: £7,150,000Yield: 5.75% NIYComment:

• Prime retail pitch• Let to Vodaphone• 2019 lease expiry



Example Transactions – Foodstore / Retail Warehouse


Tarvin Road, ChesterVendor: LPAPurchaser:PrivatePrice: £8,500,000Yield: 5.35% NIComment:

• 38,000 sq ft• Overriding lease to

Aldi Stores Limited• 20 year lease with

2.5% pa compounded revenues



Example Transactions – Foodstore / Retail Warehouse


Ashfield Road Retail Centre, Burnley

Vendor: The Gregory GroupPurchaser: Private InvestorPrice: £4,750,000Yield: 6.71% NIComment:

• 25,500 sq ft• Let to Homebase

Limited• OM reviews with 15.5

years unexpired



The Industrial Sector



Industrial Rental Growth

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0

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1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

% p

a

All Property UK Industrial NW Industrial




The Qube, LiverpoolVendor: PrivatePurchaser: Best BidsPrice: £36,250,000Yield: 5.5% NIY Gross Comment:

• Prime distribution• 500,000 sq ft• 20 year lease to

B&M

Example Transactions - Industrial




Example Transactions - Industrial

Hermes Parcelnet, Omega, WarringtonVendor: Omega, WarringtonPurchaser: LaSalle Investment ManagementPrice: £17,20,000Yield: 6.5% NIYComment:

• Distribution funding• Pre let Hermes Parcelnet

• 20 year lease c. £1.18m pa rent



North West v UK Returns



UK Sector Returns

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-15

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0

5

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15

20

25

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018% p

a

UK Retail UK Offices UK Industrial



North West Sector Returns

-25

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-15

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-5

0

5

10

15

20

25

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018% p

a

NW Retail NW Offices NW Industrial



Conclusions

• Prime yields and values at pre crash level• Offices and industrial outperforming retail• Structural change in the high street but

leisure performing well• Lack of development activity = lack of supply

– potential for rental growth• London & south east overheating• Money not the problem – stock is!!!


Invest NW: Michael King, GVA

Real Estate

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