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The EY Real Estate Asset Investment trend indicator shows increasing interest for Belgian real estate as sound investment in 2014. More findings included.
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Real Estate Assets Investment Trend Indicator Belgium 2014
Page 2
About the trend indicator 2014
Market outlook for Belgium 2014
Investment strategy for Belgium 2014
Real Estate Assets Investment Trend IndicatorBelgium 2014
European outlook for 2014
Agenda
Page 3
A high proportion of respondents (80%) see Belgium as an attractive or very attractive location to invest in real estate.
Basel III-effects on classic bank real estate loans will probably gain momentum.
Seller groups: international funds, corporates and opportunity/PE funds. Buyer groups: opportunity/PE funds and private/family offices.A price mismatch between buyers and sellers is viewed as the major barrier for deal flows.
Strongest investment focus on retail and residential properties.
The preferred cities for investment are Brussels (office and residential) and Namur (retail).
Prices in prime locations tend to increase for all types of use. Decreasing prices in peripheral areas.
Key findings 2014 for Belgium
Attractiveness
Capital markets
Transaction marketPrice trends
Sellers, buyers
Impediments
Use types
Preferred regions
Alternative debt providers as insurance companies, pension funds or debt funds will become more important in 2014.
Page 4
► The trend indicator is based on a survey of 20 companies that have been active in the Belgian property market in recent years.
► The survey focuses on two main areas:
► Assessment of the Belgian real estate investment market for the year to come.
► Outlook on the strategies that Belgian investors will pursue in the coming year.
► In addition to Belgium, this survey was conducted simultaneously in 14 other European countries.
Trend indicator: real estate investment market
► EY has conducted this survey in Belgium since 2012.
► 20 investors reported on their expectations for the coming year.
Background Objectives► The trend indicator is based on a survey
conducted by Valid Research in November and December 2013.
► The feedback from the interviews forms the results of the real estate trend indicator.
Method► Assessment of the Belgian real estate
investment market for the year to come.► Outlook on the strategies that Belgian
investors will pursue in the coming year.
The different types of investor groups surveyed:► Banks
► Closed-ended real estate funds
► Real estate stock corporations/REITs
► Institutional investors
► Opportunity/private equity funds
► Insurance companies
► Housing companies
► Other investment vehicles
Our trend indicator covers a broad range of investor groups in Belgium
Page 5
The survey was also conducted in other European countries
► Austria► Belgium► France► Germany► Italy
Participating countries ► Sweden
► Switzerland► Turkey► Ukraine ► United Kingdom
► Luxembourg► The Netherlands► Poland► Russia► Spain
European trend indicator: real estate investment market
► Participants from 15 European countries took part in the survey.
► All surveys took place in November and December 2013.
► Feedback was gathered from more than 500 companies operating in the real estate market in the surveyed countries.
► Those countries that have participated are listed below.
Page 6
Belgium’s attractiveness as a location for real estate investmentsKey messages► The majority of the respondents
(80%) view Belgium as an attractive or very attractive location to invest in real estate for 2014.
► Last year the confidence in the Belgian market was even stronger. 95% stated that Belgium was attractive or very attractive.
Original question – “How do you rate Belgium’s overall attractiveness as a location for real estate investments in 2014?“
A majority sees Belgium as an attractive investment location…
Very attractive Attractive Less attractive
25%
55%
20%
Page 7
… particularly compared with other European countries
Belgium’s attractiveness as a location for real estate investmentscompared with other European countriesKey messages
► Compared with other European countries, again the majority of respondents rate Belgium as an attractive or very attractive investment location (79%, 2013: 85%).
Original question – “How do you rate Belgium’s attractiveness as a location for real estate investments in 2014 compared with other European countries?”
Very attractive Attractive Less attractive
21%
58%
21%
Page 8
Original question – “Which of the following statements about Belgium’s real estate financial/ capital market in 2014 do you agree with?”
Influence of the capital markets in 2014…
Key messages
► Alternative sources such as insurance companies, pension funds or debt funds acting as debt providers will become more important in Belgium in 2014 (90% agree, 2013: 50%).
► Interest rates for real estate loans will probably rise (89% agree).
► The capital markets seems to be ready for real estate IPOs and equity increases (85% agree, 2013: 60%).
► Fear of high inflation also drives demand for real estate (74% agree, 2013: 80%).
"Alternative debt providers (insurance companies, pension and debt funds, mezzanine providers) will
increasingly provide financing for real estate in-vestments"
"Interest rates for real estate loans will rise in 2014"
"The capital market in 2014 will be attractive for real estate IPOs and equity capital increases"
"Due to lower loan-to-value ratios, demand for mezzanine financing will increase in 2014"
"Fear of high inflation in the medium term will drive investors towards the real estate market"
60%
32%
30%
33%
11%
30%
57%
55%
45%
63%
10%
11%
15%
22%
21%0.0526315789
473684
Strongly agree Agree Disagree Strongly disagree
"Alternative debt providers (insurance companies, pension and debt funds, mezzanine providers) will increasingly
provide financing for real estate investments"
"Interest rates for real estate loans will rise in 2014"
"The capital market in 2014 will be attractive for real estate IPOs and equity capital increases"
"Due to lower loan-to-value ratios, demand for mezzanine financing will increase in 2014"
"Fear of high inflation in the medium term will drive investors towards the real estate market"
Page 9
… on real estate investment activity
Key messages
► Basel III will have consequences for the mortgage business but nevertheless the classic bank real estate loans are gaining momentum (72%, 2013: 55%).
► The CMBS market could revive in 2014 (60% agree, 2013: 55%).
► Belgian real estate investors anticipate an increasing supply of real estate (55%, 2013: 50%).
► The Eurozone debt crisis will have considerably less impact on the Belgian real estate market compared to last year (2014: 50%, 2013: 80%).
► Only a minority (44%, 2013: 65%) believes that Belgium will face increasing consolidations (M&A activity) this year.
"Basel III regulation will make real estate loans less attractive for banks and lead to greater restraint in the mortgage business"
"The commercial mortgage backed securities market will revive in 2014"
"Supply in the real estate market will increase in 2014 (maturity of structured debt, disposal of non-performing loans, liquidation of open-ended funds)"
"The euro-zone sovereign debt crisis will increase investments by European investors in the XX real estate markets"
"There will be an increase in consolidation of real estate companies in 2014"
11%
7%
15%
5%
22%
61%
53%
40%
45%
22%
22%
33%
45%
50%
45%
6%
7%
11%
Strongly agree Agree Disagree Strongly disagree
"Basel III regulation will make real estate loans less attractive for banks and lead to greater restraint in the
mortgage business"
"The commercial mortgage-backed securities market will revive in 2014"
"Supply in the real estate market will increase in 2014 (maturity of structured debt, disposal of nonperforming
loans, liquidation of open-ended funds)"
"The Eurozone sovereign debt crisis will increase investments by European investors in the Belgian real
estate markets"
"There will be an increase in consolidation of real estate companies in 2014"
Original question – “Which of the following statements about Belgium’s real estate financial/capital market in 2014 do you agree with?”
Page 10
The Belgian real estate transaction market (1/2)
Key messages
► Green building standards will (90%, 2013: 75%) even play an increasing role for existing properties.
► More portfolio deals are foreseen in the commercial real estate sector (85% agree, 2013: 55%).
► Transaction volume is expected to increase (83%, 2013: 65%).
► The average deal size is likely to increase in 2014 (65%, 2013: 55%).
► Increased investment activity by international real estate investors seems to be likely (63%, 2013: 55%).
"Green-building standards will play a more impor-tant role with respect to existing investment prop-
erties"
"There will be more commercial real estate portfolio deals in 2014 compared to 2013"
“Overall, transaction volume in 2014 will exceed the level seen in 2013"
"The average size of real estate deals will increase in 2014”
"Investment activity by foreign real estate investors in XX will increase compared to 2013"
60%
10%
22%
10%
16%
30%
75%
61%
55%
47%
10%
15%
11%
35%
32%
0.0555555555555556
0.0526315789473684
Strongly agree Agree Disagree Strongly disagree
"Green building standards will play a more important role with regard to existing investment properties"
"There will be more commercial real estate portfolio deals in 2014 than in 2013"
“Overall, the transaction volume in 2014 will exceed the level seen in 2013"
"The average size of real estate deals will increase in 2014”
"Investment activity by foreign real estate investors in Belgium will increase compared with 2013"
Original question – “Which of the following statements about Belgium’s real estate transaction market in 2014 do you agree with?”
Page 11
The Belgian real estate transaction market (2/2)
Key messages
► The majority of respondents expects a revival of more risky investments (56% agree, 2013: 45%).
► Transparency of information on the Belgian market could obviously be improved since only about half of the respondents (52%) are satisfied with the current situation.
► It is uncertain whether AIFM will lead to an increasing consolidation in the real estate funds industry (50% agree, 2013: 55%)
► Speculative project developments are not widely anticipated (only 25% agree, 2013: 40%).
"The share of value-add and opportunistic investments will increase in 2014"
"The quantity and quality of information on the XX real estate transaction market is sufficient for investment appraisal purposes"
"The introduction of the AIFM Directive will lead to increasing consolidation in the real estate funds industry"
"Speculative project developments will return in 2014"
6%
21%
8%
5%
50%
31%
42%
20%
33%
16%
33%
60%
11%
32%
17%
15%
Strongly agree Agree Disagree Strongly disagree
"The share of value-add and opportunistic investments will increase in 2014"
"The quantity and quality of information on the Belgian real estate transaction market is sufficient for investment
appraisal purposes"
"The introduction of the AIFM Directive will lead to increasing consolidation in the real estate funds industry"
"Speculative project developments will return in 2014"
Original question – “Which of the following statements about Belgium’s real estate transaction market in 2014 do you agree with?”
Page 12
Original question – “How do you expect purchase prices in Belgium to develop in 2014 based on the type of use and location?”
Office RetailKey messages
► Opinions concerning prices of office buildings in prime locations vary: one third of the respondents expects either increasing (33%), stable (34%) or decreasing prices (33%).
► Offices in secondary locations (72%) and peripheral areas (80%) are expected to decrease in price.
► The majority expects retail properties to decrease in price in prime locations (60%) as well as in secondary locations (69%) and peripheral areas (86%).
► At the same time, there is a significant share of respondents anticipating increasing prices for retail properties in prime locations (40%).
Price trend expectations vary greatly depending on location and type of use (1/3)
Increase No change Decrease
33% 34% 33%
7%
21%
72%
0%
20%
80%
Secondary locationsPrime locations Peripheral areas
Increase No change Decrease
40%
0%
60%
0%
31%
69%
0%
14%
86%
Page 13
ResidentialKey messages
► Residential properties are expected to decrease to a significant extent in prime locations (50%), secondary locations (73%) and peripheral areas (100%).
► At the same time, half of the respondents anticipate at least stable (25%) or increasing prices (25%) for residential properties in prime locations.
► Regarding hotel buildings, decreasing prices in all locations seem almost sure (100%).
Price trend expectations vary greatly depending on location and type of use (2/3)
Increase No change Decrease
25% 25%
50%
0%
27%
73%
0% 0%
100%
Hotel
Secondary locationsPrime locations Peripheral areas
Increase No change Decrease
0% 0%
100%
0% 0%
100%
0% 0%
100%
Original question – “How do you expect purchase prices in Belgium to develop in 2014 based on the type of use and location?”
Page 14
Page 15
Price trend expectations vary greatly depending on location and type of use (3/3)
IndustrialKey messages
► The vast majority of respondents anticipate a decreasing price level for industrial buildings in all locations.
► Secondary locations are expected to suffer least with one third of the respondents anticipating stable (27%) or increasing prices (7%) here.
Increase No change Decrease
0% 0%
100%
7%
27%
66%
0%
17%
83%
Secondary locationsPrime locations Peripheral areas
Original question – “How do you expect purchase prices in Belgium to develop in 2014 based on the type of use and location?”
Page 16
Other international funds
Corporates (non-property)
Opportunity/PE funds
Open-ended funds (real estate)
Residential real estate companies
Public sector
Insurance companies
REOC/REITs
Closed-ended funds (real estate)
Banks
25%
15%
32%
11%
33%
15%
45%
11%
60%
70%
52%
68%
45%
60%
25%
67%
52%
40%
15%
15%
16%
21%
22%
25%
30%
33%
37%
60%
Which seller groups will be the most active in 2014?
Seller groups
Original question – “How active do you think the following seller groups will be in the Belgian real estate market in 2014?”
Key messages
► International funds (85%, 2013: 75%), corporates (85%, 2013: 75%) and opportunity/PE funds (85%, 2013: 80%) are expected to be the most active seller groups in 2014.
► In contrast to last year, banks form the only group that will be cautious according to the respondents (only 40% expect banks to play an active role, 2013: 75%).
Seller groups
Very active Moderately active Cautios
Page 17
Opportunity/PE funds
Private/ family office
Insurance companies
Residential real estate companies
Other international funds
Sovereign wealth funds
Open-ended funds (real estate)
Closed-ended funds (real estate)
REOC/REITs
Banks
11%
33%
40%
20%
15%
22%
15%
15%
13%
5%
73%
50%
40%
60%
65%
56%
60%
55%
49%
20%
16%
17%
20%
20%
20%
22%
25%
30%
38%
75%
Buyer groups
Original question – ”How active do you think the following buyer groups will be in the Belgian real estate market in 2014?”
Key messages
► Opportunity/PE funds (84%, 2013: 65%) and family offices (83%, 2013: 65%) are expected to be among the most active buyer groups in 2014.
► Again, in clear contrast to last year, banks are seen as cautious players in 2014 (only 25% see an active role, 2013: 80%).
Which buyer groups will be the most active in 2014?
Very active Moderately active Cautios
Page 18
Which will be the greatest impediments to deal flows in 2014?
Original question – “Do you agree or disagree that the following will be impediments to Belgium's deal flow in 2014?”
Key messages
► A price mismatch between buyers and sellers is viewed as the major barrier for deal flows in 2014 (75%, 2013: 75%), no change to last year.
► The level of equity required by debt providers is another big hurdle (65%, 2013: 70%).
► The limited availability of debt funding remains an impediment, though not as much as last year:
► senior debt funding (60%, 2013: 80%)
► junior debt funding (58%, 2013: 70%)
Transaction impediments
Price mismatch between buyers and sellers
Level of equity required
Limited availability of senior debt funding
Limited availability of junior debt funding
20%
25%
30%
21%
55%
40%
30%
37%
20%
30%
35%
37%
5%
5%
5%
5%
Strongly agree Agree Disagree Strongly disagree
Page 19
Bank actions to deal with distressed loans
Original question – “Which actions do you expect banks to take regarding distressed loans in Belgium?“
Key messages
► Selling distressed loans seems to be the most common way to deal with them (88%).
► An increase in debt-for-equity-swaps is expected (72%, 2013: 55%).
► Enforcements will continue to play a certain role with regard to distressed loans, too (57%, 2013: 65%).
► The extension of the repayment period has become less popular compared to last year (42%, 2013: 65%).
Sale of loans
Increase in debt-for-equity swaps
Increased enforcement
Increase in consensual restructuring deals
Increase in replacement of real estate asset managers
Extend repayment period
0.166666666666667
0.142857142857143
0.15
0.0526315789473684
0.210526315789474
71%
72%
43%
40%
42%
21%
6%
28%
36%
35%
42%
37%
0.0555555555555556
0.0714285714285714
0.1
0.105263157894737
0.210526315789474
Strongly agree Agree Disagree Strongly disagree
Approaches to dealing with distressed loans
Page 20
The following types of use will be popular with investors in 2014
Strong or moderate investment focus
Original question – “Compared to 2013, what kind of focus do you intend to give to the following real estate use types in your investment strategy for 2014?“
Key messages
► Retail properties will have the highest focus for investors (22% strong, 2013: 25%) or at least a moderate one (22%, 2013: 30%).
► Office real estate has lost even more significance compared to last year (34% strong and moderate, 2013: 50%).
► Interest in residential properties has not changed significantly (45% strong and moderate, 2013: 40%).
Office Retail Residential Other
Strong Moderate
17% 17%22% 22%
17%
28%
6% 6%
Page 21
The following types of use will not be as popular with investors in 2014
Low or no investment focus
Original question – “Compared to 2013, what kind of focus do you intend to give to the following real estate use types in your investment strategy for 2014?“
Key messages
► It seems that many Belgian investors do not have a clear focus on a special type of use.
Office Retail Residential Other
Low No focus
38%
28%
17%
39%
11%
44%
0%
88%
Page 22
Brussels preferred place for offices, small retail focus on Namur
Office and retail focus
Original question – “Which primary locations in Belgium will you be focusing your investments on in 2014?“
Key messages
► Brussels apparently is the most attractive city for office investments (30%, 2013:35%). Other Belgian cities attract a lower demand for offices. Among those, Ghent is in the lead with 10% (2013: 10%).
► Altogether, the differences in retail location demand is not spread apart very much. Namur has the highest retail focus with 15%, 2013: 25%).
Brussels
Ghent
Namur
Mons
Liège
Other
Leuven Antwerp
Office Retail
30%
0%0%
15%
0%5%
0%5%5% 5%
10%5%5%
10%
0% 0%
Page 23
Brussels, Liege, Ghent, Antwerp most sought after for residential real estate
Residential and no focusKey messages
► For residential investments, several cities are attractive: Brussels (35%, 2013:5%), Liege (20%, 2013: 25%), Ghent (20%, 2013: 30%) and Antwerp (15%, 2013: 20%).
Original question – “Which primary locations in Belgium will you be focusing your investments on in 2014?“
Brussels
Ghent
Namur
Mons
Liège
Other
Leuven Antwerp
Residential No focus
35% 35%
5%
80%
20%
75%
5%
90%
15%
75%
20%
65%
5%
80%
0%
100%
Page 24
Page 25
Most attractive exit options for real estate investments in 2014
Original question – “What will be the most attractive exit options for your real estate investments in 2014? (Multiple answers possible)”
Key messages
► The direct sale of single assets is anticipated to be the most favourable exit option in 2014 (39%).
► In the year before, trade sales had already gained significant importance as an exit channel.
Planned exit options
39%
11% 11%
39%
11%
6%
0%
Page 26
Impact of the digital world on real estate
Original question – “What impact will the digital world have on space demand for the following property types?”
Key messages
► According to the respondents, different impacts for the individual types of use will occur due to the ongoing digitalization of the world.
► The office sector will face a decreasing impact concerning space demand (61%), residential real estate will face no changes (63%) and retail real estate shows a mixed trend.
Increase No change Decrease
11%
28%
61%
33% 34% 33%
21%
63%
16%
29%
47%
24%
Impact of the digital world on demand for space
Office Retail Residential Industrial
Page 27
Impact of the digital world on real estate
Original question – “What impact will the digital world have on space demand?”
Key messages
► The most obvious impact is expected with regard to online suppliers replacing local stores in weak locations (83%).
► On the other hand, e-commerce-suppliers could emerge as additional tenants for retail space (67%).
Impact of the digital world on demand for space
"Online suppliers will replace over-the-counter retail stores in weak locations"
"E-Commerce suppliers will appear as tenants for retail space"
"Brokers will lose market share for renting/ selling residential real estate due to Internet listing services"
"Home office working is out-dated and staff will move back to the workplace"
0.277777777777778
0.222222222222222
55%
67%
44%
18%
17%
33%
28%
47%
0.0555555555555556
0.352941176470588
Strongly agree Agree Disagree Strongly disagree
"Online suppliers will replace over-the-counter retail stores in weak locations"
"E-Commerce suppliers will emerge as tenants for retail space"
"Brokers will lose market share for renting/selling residential real estate due to Internet listing services"
"Home office working is out-dated and staff will move back to the workplace"
Page 28
Attractiveness
► The majority of the respondents (80%) view Belgium as an attractive or very attractive location to invest in real estate for 2014.
► Compared with other European countries, again the majority of respondents rate Belgium as an attractive or very attractive investment location (79%, 2013: 85%).
Real estate financial/capital market
► Alternative sources such as insurance companies, pension funds or debt funds acting as debt providers will become more important in Belgium in 2014 (90% agree, 2013: 50%).
► Interest rates for real estate loans will probably rise (89% agree).
Real estate transaction market
► More portfolio deals are foreseen in the commercial real estate sector (85% agree, 2013: 55%).
► Transaction volume is expected to increase (83%, 2013: 65%).
Purchase price expectations
► Opinions concerning prices of office buildings in prime locations vary: one third of the respondents expects either increasing (33%), stable (34%) or decreasing prices (33%).
► The majority expects retail properties to decrease in price in prime locations (60%) as well as in secondary locations (69%) and peripheral areas (86%).
► Residential properties are expected to decrease to a significant extent in prime locations (50%), secondary locations (73%) and peripheral areas (100%).
Seller/buyer groups► International funds (85%, 2013: 75%), corporates
(85%, 2013: 75%) and opportunity/PE funds (85%, 2013: 80%) are expected to be the most active seller groups in 2014.
► Opportunity/PE funds (84%, 2013: 65%) and family offices (83%, 2013: 65%) are expected to be among the most active buyer groups in 2014.
Outlook for Belgium (1/2)
Page 29
Greatest deal impediments► A price mismatch between buyers and sellers is
viewed as the major barrier for deal flows in 2014 (75%, 2013: 75%), no change to last year.
Bank actions to handle distressed loans
► Selling distressed loans seems to be the most common way to deal with them (88%).
Real estate use types
► Retail properties will have the highest focus for investors (22% strong, 2013: 25%) or at least a moderate one (22%, 2013: 30%).
► Office real estate has lost even more significance compared to last year (34% strong and moderate, 2013: 50%).
► Interest in residential properties has not changed significantly (45% strong and moderate, 2013: 40%).
Preferred regions
► Brussels apparently is the most attractive city for office investments (30%, 2013:35%). Other Belgian cities attract a lower demand for offices. Among those, Ghent is in the lead with 10% (2013: 10%).
► Altogether, the differences in retail location demand is not spread apart very much. Namur has the highest retail focus with 15%, 2013: 25%).
► For residential investments, several cities are attractive: Brussels (35%, 2013:5%), Liege (20%, 2013: 25%), Ghent (20%, 2013: 30%) and Antwerp (15%, 2013: 20%).
Planned exit options► The direct sale of single assets is anticipated to be
the most favourable exit option in 2014 (39%).Impact of the digital world
► The most obvious impact is expected with regard to online suppliers replacing local stores in weak locations (83%).
► On the other hand, e-commerce-suppliers could emerge as additional tenants for retail space (67%).
Outlook for Belgium (2/2)
Page 30
Real Estate Assets Investment Trend Indicator – Europe 2014
Page 31
A clear majority in each of the countries surveyed think that their market will be attractive to real estate investors in 2014.
More investors are set to target riskier assets as the market improves but the supply of core assets remains low.
As banks limit their exposure to real estate, investors are set to turn to alternative sources of finance.
Retail prices set to strengthen, especially in markets hit hardest by the downturn.
PE funds set to be among the most active investors across Europe in 2014.
Brokers and stores alike are braced for renewed pressure from e-commerce.
Eurozone crisis not main driver for real estate investments anymore.
Key findings for Europe
Attractiveness
Transaction volumeTransaction marketCapital markets
Capital markets
Prices and focus
Sellers, buyers
E-commerce trends
Cross-border investments are set to drive an increase in transaction volume.
Page 32
Attractiveness of your market
Market attractiveness continues to improve across Europe
Original question: “How do you rate the countries’ overall attractiveness as a location for real estate investments in 2014? / How do you rate the country’s overall attractiveness as a location for real estate investments in 2014, compared with other locations in Europe?"
Key messages
► A clear majority in each of the countries surveyed think that their market will be attractive to real estate investors in 2014.
► The positive change in sentiment compared with last year is particularly striking in the countries hit hardest by the Eurozone crisis – Spain and Italy.
► In comparison with other European countries, Germany and the UK are seen as most attractive by respondents.
► In 14 out of the 15 countries surveyed, more than two-thirds rate their real estate markets as attractive compared with other European markets.
In comparison with other countries
Very attractive Attractive Less attractive
Poland
Germany
UK
Sweden
Austria
Russia
Spain
Luxembourg
Turkey
Switzerland
Belgium
Netherlands
Ukraine
Italy
France
67%
67%
60%
65%
60%
58%
35%
47%
35%
45%
55%
54%
57%
44%
45%
33%
32%
36%
30%
34%
30%
49%
35%
45%
35%
25%
13%
9%
17%
15%
1%
4%
5%
6%
12%
16%
18%
20%
20%
20%
33%
34%
39%
40%
35%
59%
35%
29%
41%
16%
47%
47%
55%
35%
21%
10%
16%
27%
13%
50%
39%
63%
61%
56%
74%
40%
35%
35%
35%
58%
57%
40%
41%
69%
15%
2%
2%
10%
3%
10%
13%
18%
10%
30%
21%
33%
44%
32%
18%
Page 33
Transaction volume expected to exceed 2013 level
Transaction volume
Original question – “Do you agree with the following statement: Overall, transaction volume in 2014 will exceed the level seen in 2013. / Investment activity by international real estate investors will increase compared with 2013.”
Key messages
► Transaction volume is set to increase in 2014 for the second straight year, driven largely by cross-border investments.
► In almost half of the countries, more than three-quarters of interviewees believe that volume will rise in their country.
► Spain and Italy are predicted to show the biggest improvements compared with last year.
► Majorities in all countries agree that cross-border activity will increase in 2014,
Cross-border activity
Agree Rather agree Rather disagree Disagree
Luxembourg
UK
Netherlands
Spain
Belgium
Sweden
Ukraine
Russia
Germany
Italy
Turkey
Poland
France
Austria
Switzerland
In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.
13%
11%
13%
16%
11%
19%
23%
27%
28%
27%
30%
33%
35%
41%
50%
74%
63%
64%
58%
61%
71%
77%
70%
50%
70%
55%
26%
55%
47%
45%
13%
24%
23%
26%
22%
10%
3%
22%
15%
41%
10%
9%
5%
2%
6%
3%
3%
20%
10%
4%
42%
16%
16%
31%
3%
10%
15%
15%
6%
10%
60%
57%
81%
48%
47%
63%
52%
75%
47%
59%
60%
43%
56%
50%
50%
13%
33%
4%
10%
32%
21%
48%
25%
22%
38%
25%
42%
28%
41%
30%
7%
11%
5%
5%
3%
10%
Page 34
Riskier investment targets on the rise
Opportunistic investments
Original question – “Do you agree with the following statement: The share of value-add and opportunistic investments will increase in 2014. / Speculative project developments will return in 2014.”
Key messages
► As markets improve and the supply of core assets remains low, investors are expected to take more risks.
► Investors also anticipate a rise in speculative project developments in selected markets, especially where core products are often unable to deliver sufficient returns.
Speculative project developments
Agree Rather agree Rather disagree Disagree
Spain
Sweden
Netherlands
France
UK
Germany
Russia
Turkey
Ukraine
Poland
Switzerland
Italy
Belgium
Luxembourg
Austria
In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.
10%
10%
11%
13%
15%
18%
21%
25%
29%
29%
15%
30%
33%
46%
56%
64%
70%
78%
66%
63%
56%
79%
70%
71%
50%
60%
57%
50%
31%
41%
26%
20%
11%
18%
22%
25%
5%
21%
10%
8%
6%
15%
3%
3%
1%
15%
5%
11%
8%
37%
38%
13%
40%
56%
48%
63%
42%
45%
40%
25%
41%
20%
56%
22%
56%
52%
67%
56%
39%
38%
37%
48%
55%
48%
45%
48%
60%
25%
75%
7%
5%
20%
3%
4%
5%
4%
20%
3%
15%
13%
3%
5%
5%
10%
5%
8%
10%
8%
5%
6%
Page 35
Perceptions of the Eurozone crisis
Inflation overtakes the Eurozone crisis as the main investment driver
Original question: “Do you agree with the following statement: The Eurozone sovereign debt crisis will drive investments by European investors in the real estate markets. / Fear of high inflation in the medium term will drive investors towards the real estate market."
Key messages
► Most European countries no longer view the Eurozone sovereign debt crisis as the main driver for real estate investments.
► In just four countries – Germany, Austria, Sweden and the UK – more than two-thirds of respondents expect the debt crisis to push real estate investments in 2014.
► Concerns about the impact of inflation have decreased compared with last year’s survey.
► However, majorities in most European countries believe that fear about future inflation will drive investors toward real estate investments.
Fear of inflation
Strongly Agree Agree Disagree Strongly Disagree
Germany
Austria
Sweden
UK
Luxembourg
Turkey
France
Spain
Belgium
Italy
Poland
Switzerland
Netherlands
Russia
Ukraine
7%
16%
29%
27%
29%
40%
38%
39%
50%
48%
48%
40%
68%
65%
68%
33%
62%
71%
57%
59%
45%
49%
45%
45%
41%
36%
30%
32%
29%
29%
60%
19%
14%
6%
15%
8%
10%
5%
8%
12%
15%
3%
2%
6%
5%
6%
3%
4%
15%
6%
3%
37%
22%
5%
7%
13%
15%
15%
23%
11%
11%
4%
20%
3%
52%
65%
45%
73%
62%
60%
35%
40%
63%
43%
39%
40%
63%
57%
47%
11%
13%
40%
20%
19%
20%
47%
37%
21%
43%
57%
40%
27%
43%
50%
10%
6%
5%
3%
5%
3%
7%
3%
Page 36
Fund liquidation, disposal of NPLs and refinancing requirements set to drive real estate supply
Importance of green-building standards
Original question – “Do you agree with the following statement: Supply in the real estate market will increase in 2014 (maturity of structured debt, disposal of non-performing loans, liquidation of open-ended funds)."
Strongly Agree Agree Disagree Strongly Disagree
Key messages
► Most European countries expect supply to increase in 2014, due to the maturity of structured debt, the disposal of non-performing loans (NPLs) and the liquidation of open-ended funds.
► Switzerland and Austria are the only countries in which fewer than half of investors expect an increase in real estate supply.
In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.
Real estate supply outlook
Russia
UK
Luxembourg
Sweden
Netherlands
Turkey
Italy
Germany
Poland
Ukraine
France
Spain
Belgium
Switzerland
Austria
90%
63%
76%
62%
69%
60%
49%
53%
46%
58%
52%
46%
40%
30%
28%
10%
17%
24%
24%
24%
30%
31%
34%
35%
39%
38%
37%
45%
55%
63%
20%
14%
7%
10%
14%
11%
15%
5%
10%
15%
5%
6%
6%
2%
4%
3%
5%
7%
10%
3%
Page 37
Commercial mortgage-backed securities market well-positioned for revival
Importance of green-building standards
Original question – “Do you agree with the following statement: The commercial mortgage-backed securities market will revive in 2014."
Strongly Agree Agree Disagree Strongly Disagree
Key messages
► The commercial mortgage-backed securities (CMBS) market is expected to rebound, particularly in the most liquid property markets of the core Eurozone.
► More than half of the countries surveyed expect levels of CMBS issuance to increase in 2014.
► Some southern and eastern European countries, such as Italy, Russia and Ukraine, are more pessimistic about the CMBS market.
In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.
Commercial mortgage-backed securities market (CMBS)
France
Luxembourg
UK
Germany
Belgium
Sweden
Netherlands
Poland
Spain
Turkey
Switzerland
Russia
Austria
Italy
Ukraine
5%
13%
5%
13%
7%
8%
13%
5%
64%
56%
61%
52%
53%
60%
57%
46%
35%
42%
47%
44%
43%
27%
23%
28%
31%
34%
33%
33%
35%
43%
46%
49%
48%
41%
56%
57%
68%
77%
3%
2%
7%
5%
3%
5%
12%
5%
Page 38
Rising demand for alternative lenders
Importance of green-building standards
Original question – “Do you agree with the following statement: Alternative debt providers (insurance companies, pension and debt funds, mezzanine providers) will increasingly provide financing for real estate investments."
Strongly Agree Agree Disagree Strongly Disagree
Key messages
► As many banks reduce their exposure to real estate, the majority of respondents predict that offer for mezzanine financing and other alternative lenders will rise.
► Ukraine and Poland are the only countries in which fewer than half of investors do not expect the share of alternative financing to increase.
► New debt sources are likely to help reduce the funding gap in the most liquid European markets.
In some cases no answers were provided by the respondents. This is not shown in the graph. Thus, the total might deviate from 100%.
Alternative debt providers
Belgium
UK
Netherlands
Sweden
Germany
Luxembourg
France
Turkey
Russia
Spain
Switzerland
Austria
Italy
Ukraine
Poland
60%
20%
7%
14%
39%
41%
28%
15%
28%
40%
9%
15%
30%
69%
79%
72%
45%
41%
54%
65%
77%
48%
35%
57%
58%
48%
31%
10%
9%
14%
14%
16%
12%
18%
20%
23%
24%
25%
34%
42%
52%
54%
2%
6%
Page 39
Office and retail prices stable or rising; residential property leveling off
Original question – “How do you expect purchase prices to develop in 2014, based on the type of use and location?”
Price trends (prime locations)
CH
UK
SP
F
RUS
SWE
PL
GER
AT
NL
BEL
I
UA
TR
LUX
Key messages► Most countries surveyed expect
prices for office space in prime locations to remain stable or increase. However, some countries anticipate prices falling from peak levels.
► In countries such as the Netherlands and Spain, which have been hit particularly hard by the market downturn, prices are expected to strengthen over the next year.
► Respondents in most countries anticipate stable or increasing prices for prime retail investments.
► Sentiment about residential prices for the year ahead is more bearish, with respondents in nearly half of the countries surveyed predicting price falls in prime locations.Office Retail Residential
Rising Constant Falling
Page 40
Seller groups
Real estate investment trusts, international funds and private equity set to become more active
Original question: “How active do you think the following seller and buyer groups will be in 2014?"
Key messages
► Real estate operating companies (REOCs), real estate investment trusts (REITs), international funds and private equity (PE) funds are expected to be among the most active investors in real estate throughout Europe in 2014, on both the buy and sell side.
► In addition, private or family office , residential real estate companies and institutional investors are set to be among the most likely buyers of property in 2014.
Buyer groups
Very active Moderately active Cautious
REOC/REITs
Opportunity/PE-funds
Other international funds
Private/family Office
Residential real estate companies
Insurance companies
Sovereign wealth funds
Open-ended funds
Closed-ended funds
Banks
26%
38%
33%
39%
33%
33%
27%
26%
23%
13%
55%
43%
47%
41%
44%
43%
49%
48%
43%
26%
19%
19%
20%
20%
23%
24%
24%
26%
34%
61%
REOC/REITs
Other international funds
Opportunity/PE-funds
Open-ended funds
Closed-ended funds
Corporates (non-property)
Residential real estate companies
Banks
Insurance companies
Public Sector
20%
26%
37%
30%
27%
15%
31%
24%
19%
18%
60%
52%
41%
47%
49%
57%
40%
44%
44%
42%
20%
22%
22%
23%
24%
28%
29%
32%
37%
40%
Page 41
Investment to focus on residential property
Original question – “Compared with 2013, what level of focus do you intend to give to the following real estate use types in your investment strategy for 2014?”
Investment focus: residential properties
CH
UK
SP
F
RUS
SWE
PLGER
AT
NL
BEL
I
UA
TR
LUX
Key messages► European respondents will focus
their investment strategies most strongly on residential property.
► Investors in the UK, Spain, France, Germany, Sweden and Italy show the strongest interest in office properties.
► Despite being the least favored use type, there will still be a significant number of investors focusing on retail in each of the countries surveyed.
Office Retail Residential
LegendStrong & Moderately Active (values in %)
Page 42
Page 43
E-commerce a major threat to retail outlets in non-prime areas
Original question – “Do you agree with the following statement: Brokers will lose market share for renting or selling residential real estate due to Internet listing services. / Online suppliers will replace over-the-counter retail stores in weak locations. / E-Commerce suppliers will appear as tenants for retail space. / Home office working is out-dated and staff will move back to the workplace.”
Key messages
► Respondents in most countries believe brokers will lose market share for renting or selling residential real estate to internet listing services.
► The majority of investors in each of the countries surveyed sees e-commerce as a major threat to retail stores in less popular locations.
► Most of the respondents also expect e-commerce suppliers to rent retail locations in order to increase brand awareness.
Replacement of over-the-counter retail stores
Strongly agree AgreeBrokers lose market share
Aust
ria
Spai
nIta
ly
Nethe
rland
s
Switz
erla
nd
Belg
ium
Turk
ey
Fran
ce
Russ
ia
Ukrai
ne
Germ
any
Luxe
mbo
urg UK
Pola
nd
Swed
en
78%74% 71% 70% 67% 67% 63% 62% 61%
57% 53% 53% 52%44%
32%
Aust
ria
Germ
any
Belg
ium
Nethe
rland
s
Swed
en
Switz
erla
nd
Turk
ey UK
Luxe
mbo
urg
Pola
nd
Fran
ce
Spai
n
Russ
iaIta
ly
Ukrai
ne
84% 84% 82% 80% 80% 76% 74%68% 67% 67% 64% 63%
58% 54%50%
Page 44
Attractiveness
► A clear majority in each of the countries surveyed think that their market will be attractive to real estate investors in 2014.
► The positive change in sentiment compared with last year is particularly striking in the countries hit hardest by the Eurozone crisis – Spain and Italy.
Real estate financial/transaction market
► Transaction volume is set to increase in 2014 for the second straight year, driven largely by cross-border investments.
► Spain and Italy are predicted to show the biggest improvements compared with last year.
► As markets improve and the supply of core assets remains low, investors are expected to take more risks.
► Investors also anticipate a rise in speculative project developments in selected markets, especially where core products are often unable to deliver sufficient returns.
Real estate capital market
► Most European countries no longer view the Eurozone sovereign debt crisis as the main driver for real estate investments.
► Concerns about the impact of inflation have decreased compared with last year’s survey.
► Most European countries expect supply to increase in 2014, due to the maturity of structured debt, the disposal of non-performing loans (NPLs) and the liquidation of open-ended funds.
► The commercial mortgage-backed securities (CMBS) market is expected to rebound, particularly in the most liquid property markets of the core Eurozone.
► New debt sources are likely to help reduce the funding gap in the most liquid European markets.
Outlook Europe (1/2)
Page 45
Price trends
► Most countries surveyed expect prices for office space in prime locations to remain stable or increase. However, some countries anticipate prices falling from peak levels.
► Respondents in most countries anticipate stable or increasing prices for prime retail investments.
► Sentiment about residential prices for the year ahead is more bearish, with respondents in nearly half of the countries surveyed predicting price falls in prime locations.
Seller/buyer groups
► Real estate operating companies (REOCs), real estate investment trusts (REITs), international funds and private equity (PE) funds are expected to be among the most active investors in real estate throughout Europe in 2014, on both the buy and sell side.
Outlook Europe (2/2)
Investment focus
► European respondents will focus their investment strategies most strongly on residential property.
► Investors in the UK, Spain, France, Germany, Sweden and Italy show the strongest interest in office properties.
E-commerce trends
► Respondents in most countries believe brokers will lose market share for renting or selling residential real estate to internet listing services.
► The majority of investors in each of the countries surveyed sees e-commerce as a major threat to retail stores in less popular locations.
Page 46
Page 47
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