PRIVATE & CONFIDENTIAL European Market Outlook April 2012.
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Transcript of PRIVATE & CONFIDENTIAL European Market Outlook April 2012.
PRIVATE & CONFIDENTIALwww.dtz.com
European Market Outlook
April 2012
Agenda
• European overview
• European property market – recent trends and forecasts
• Capital market trends
• European scenario analysis
2
Divergent economic outlook
Source: Various Statistics Agencies, DTZ Research
3
GDP growth forecasts for 2012
-2%
-1%
0%
1%
2%
3%
4%
5% Core euro Nordics CEEEuro periphery
Bond markets calmer following LTRO, but Italian and Spanish yields have risen once again
Source: Bloomberg, DTZ Research
4
5 year government bond yields, selected countries
0%
4%
8%
12%
16%
20%
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
UK Germany France Spain Italy Ireland Portugal
LTRO announcement LTRO II
Agenda
European overview
European property market – recent trends and forecasts
Capital market trends
European scenario analysis
5
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
2002-2006 2007-2011 2012-2016
average annual rental growth
Office Retail Industrial
Little rental growth expected in near term
Source: DTZ Research
6
European rental growth
Prime office and retail rents mostly flat in recent months
6 month % change, Q3-11 to Q1-12
7
Prime rents
Source: DTZ Research
-2%0%0%0%0%0%0%0%0%0%0%1%1%3%3%4%4%5%6%
8%
-30% -20% -10% 0% 10% 20% 30%
MilanBarcelona
BerlinBudapest
CopenhagenDublin
FrankfurtHamburg
MadridMunichPrague
StockholmDusseldorf
London (WE)Helsinki
BrusselsWarsaw
AmsterdamOslo
Paris (CBD)
Europe
0%0%0%0%0%0%0%0%0%0%0%0%0%0%0%
1%2%
9%
-30% -20% -10% 0% 10%
AmsterdamBarcelona
BerlinBudapest
CopenhagenDublin
FrankfurtLondon (WE)
MadridMilan
MunichOsloParis
PragueStockholm
WarsawHelsinki
Brussels
Europe
Vacancy rates stable in most markets
Q3-11 and Q1-12, %
8
Office market vacancy rates
Source: DTZ Research
Q1-2012 X Q3-2011 Region Average
0%
5%
10%
15%
20%
25%
Q1-2012 Q3-2011 Average
Average= 11.3%
-2%-1%0%1%2%3%4%5%6%7%8%9%
Top Five Bottom Five
rental growth
Strongest growth seen in Eastern Europe
Source: DTZ Research
9
Office rental growth 2012
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2002-2006 2007-2011 2012-2016
average annual capital growth
Office Retail Industrial
Stable yields points to period of weak capital growth
Source: DTZ Research
10
European capital growth
Office and retail yields also little changed over past 6 months
Q1-12 yields and 6 month bps change, Q3-11 to Q1-12
11
Prime office yields
Source: DTZ Research
-25-25
-15-5-5
000000000000
1010
30
6.25%7.25%5.50%4.70%5.00%4.50%4.50%4.70%5.00%5.05%5.25%5.25%5.25%5.75%6.00%6.25%7.75%6.10%6.25%6.30%
-80 -40 0 40 80
PragueDublin
HelsinkiStockholm
BerlinLondon (WE)
Paris (CBD)Munich
HamburgFrankfurt
CopenhagenDusseldorf
OsloMadrid
BarcelonaWarsaw
BudapestAmsterdam
BrusselsMilan
Europe
-15-10-10-10
-50000000000000
4.75%4.80%4.90%5.40%4.70%4.25%4.25%4.75%5.00%5.00%5.00%5.25%5.75%5.75%6.00%6.25%6.25%7.50%
-80 -40 0 40 80
BerlinAmsterdam
FrankfurtHelsinki
StockholmLondon (WE)
MunichParis
CopenhagenOslo
BrusselsMilan
BarcelonaMadrid
WarsawDublin
PragueBudapest
Europe
Yields in core markets to edge upward as interest rates normalise....
Source: DTZ Research
12
Prime yield forecasts for selected markets – 2012-16
.....yields in CEE to edge inward as the European economy recovers
Source: DTZ Research
2012-2016 (%pa)
13
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
2011 2012 2013 2014 2015 2016
Budapest Moscow Prague Tallinn Vilnius Warsaw
Prime yield forecasts for selected markets – 2012-16
Agenda
• European overview
• European property market – recent trends and forecasts
• Capital market trends
• European scenario analysis
14
87
124
147
203
230
111
62
104 110
2003 2004 2005 2006 2007 2008 2009 2010 2011
€bn
Q1 Q2 Q3 Q4
Full year volumes up 6% year on year despite increased caution
Source: DTZ Research; Propertydata
15
European investment activity
39
23
3028
31
2010.4 2011.1 2011.2 2011.3 2011.4
€bn
UK Germany France Benelux Nordics CEE Other
Contrasting fortunes across Europe
Source: DTZ Research; Propertydata
16
European investment activity by geography
62.5
103.9109.9
6.4
3.8
35.1
2.2
2009 2010 2011
€bn
Volume CV impact Trading impact
2011 growth mostly driven by capital value increases
Source: DTZ Research
17
Drivers of European investment activity
0
5
10
15
20
25
30
35
40
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%€m
Under 20m 20-100m 100-500m Above 500m Average Lot size
Rise in lot size over the quarter, but down for the year as a whole
Source: DTZ Research
18
Investment activity by lot size
2830
16
101 2
17
24
19
23 23
39
23
2927
31
2008
.2
2008
.3
2008
.4
2009
.1
2009
.2
2009
.3
2009
.4
2010
.1
2010
.2
2010
.3
2010
.4
2011
.1
2011
.2
2011
.3
2011
.4
€bn
Domestic Intra-regional Inter-regional
Growth in domestic investment …
Source: DTZ Research
19
European investment activity by source of capital
-2.5
-0.4-1.1
-2.5
-1.2
0.5
-1.0
0.3 0.3
-2.0
2.0
1.5 0.8
2.2 3.2
2010.4 2011.1 2011.2 2011.3 2011.4
€bn
Domestic Intra-regional Inter-regional
But non-European investors remain net-buyers
Source: DTZ Research
20
Net investment by source of capital
2010.2 2010.3 2010.4 2011.1 2011.2 2011.3 2011.4
Private Property Vehicle Private Property Company Institution
Private Investor Listed Property Companies Corporate
Other
Listed property companies less active on the buy-side
Source: DTZ Research
21
Investment activity by investor type
and become net sellers in Q4
Source: DTZ Research22
Net investment by investor type
-1.2
-5.7
3.3
5.5
1.2
-2.7
3.22.22.5
-1.8
1.3
-0.3
2.0
-3.6
3.6
1.3
-2.3
-0.7
3.1
1.3
Listed Property Companies
Private Property Company
Private Property Vehicle
Institutions
€bn
2010.4 2011.1 2011.2 2011.3 2011.4
17
811 9
15
12
9
109
9
5
2
23
2
3
3
22
3
1
1
32
2
2010.4 2011.1 2011.2 2011.3 2011.4
€bn
Office Retail Mixed Use Industrial Other/Unknown
Growth in office investment and retail holds steady over the year
Source: DTZ Research 23
European investment activity by sector
Shopping Centre61%High Street
16%
Retail Park/ Warehouse
13%
Supermarket8%
Leisure/ Other2%
0
50
100
150
200
250
€bn
Uncertainty could push volumes lower in 2012
Source: DTZ Research
24
European investment volume forecast
Agenda
• European overview
• European property market – recent trends and forecasts
• Capital market trends
• European scenario analysis
25
Why do scenario analysis?
• This is NOT our base case forecast, which shows continued recovery
• But, many market participants focused on managing downside risks
• Scenario analysis helps quantify the downside for office markets
• Using a four-step approach in our scenario analysis:– Define the downside economic scenario– Measure impact across 45 European office occupier markets– Take into account yield impact and quantify total return change– Use DTZ Fair Value Index methodology to assess attractiveness
26
European scenario analysis assumptions
• Base case probability = 45%, break-up scenario probability = 10%. Supplied by Oxford Economics, Jan 2012;
• Disorderly defaults in Greece, Portugal and Ireland which hit banks hard, particularly in France and Germany;
• Business and consumer confidence fall, firms cut back on investment, labour markets weaken and economies across Europe are plunged back into recession;
• Authorities hold interest rates at record lows for an extended period;
• Impact of crisis reaches well beyond the borders of the Single Currency bloc, tipping the UK back into recession as well.
27
Euro-zone break-up scenario prompts deep recession in Europe
Source: DTZ Research, Oxford Economics
%y/y
EU27 GDP
Average %pa
Base case 1.8
Scenario 1.0
2012-16
• Euro-zone to break up
•Greece, Ireland, Italy, Portugal and Spain leave single currency
•Banks suffer heavy losses
-7.5%
-5.0%
-2.5%
0.0%
2.5%
5.0%
7.5%
Base Case Euro-zone Break-up
Forecast
28
Nordics/UK/Emerging Europe hold up better than Eurozone
Source: DTZ Research, Oxford Economics
%pa
GDP, 2012-2016
2012 %pa
Spain -4.6%
Italy -4.2%
Ireland -4.0%Belgium -3.9%
EU 27 -2.0%
France -1.6%
Netherlands -1.5%
Finland -1.5%
Eurozone -1.3%
Sweden -1.1%Germany -0.7%
UK -0.7%
Poland -0.3%
Turkey -0.2%
Russia 0.1%
Eurozone markets in grey
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Base Case Euro-zone Break-up Scenario
29
Euro break-up scenario sees rental declines in many markets
Source: DTZ Research
Prime rents pa 2012-2016
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Base Case Euro-zone Break-up Scenario
OFFICE RETAIL INDUSTRIAL
30
Risk aversion and recession push yields higher under euro break-up
Source: DTZ Research
European prime yields by sector
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Retail Office Industrial
Solid = Base CaseDashed = Euro Break-up Scenario
Forecast
31
Euro break-up results in capital value declines in some markets
Source: DTZ Research
Prime capital values 2012-2016
Cumulative % change
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Base Case Eurozone Break-up scenario
OFFICE RETAIL INDUSTRIAL
32
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