Real Estate Asset Investment Trend Indicator

R l E t tReal EstateAsset InvestmBelgium 201

ment Trend Indicator3

Key finding

Ninety-five percenattractive location

Uncertainty in the i t t ti itinvestment activity

The Belgian real emajority of marke

Th t t

The strongest bupension funds, re

The strongest secompanies, oppo

pension funds, re

Limited availabilitIncreased enforce

Retail properties Retail properties significantly in im

The preferred regGhent (residentia

gs for 2013

nt of participants see Belgium as an attractive or very n for real estate investments.

capital markets in 2013 could support real estate y.

estate transaction market is seen as robust by a et participants.

ll t d t b id ti l l t t

yer groups are expected to be insurance companies/ esidential real estate companies and banks.

ller groups are expected to be residential real estate ortunity/PE funds and other international funds.

esidential real estate companies and banks.

ty of senior debt funds are the significant barrier; ement is the preferred way to deal distressed loans.

will target for investors office properties declined will target for investors, office properties declined mportance.

gions are Brussels (office), Antwerp (retail) and al).

Agenda

Real Estate Asset Investment Trend IndicatorBelgium 2013

About the trend ind

Belgium 2013

Market outlook for

Investment strateg

European outlook fo

dicator 2013

Belgium 2013

y for Belgium 2013

or 2013

Real EstateAsset Investment Trend Indicator

l i 20 3Belgium 2013

Our trend indicator covers a broad ra

► The trend indicator is based on a survey of 20 companies thatin the Belgian property market in recent years.

Trend indicator: real estate investment market

► The survey focuses on two main areas:

► Assessment of the Belgian real estate market for the year to

► Outlook on the strategies which Belgian investors will pursuyearyear.

► In addition to Belgium, this survey was conducted simultaneoEuropean countries.

► Ernst & Young Real Estate has conducted Background Objectives

► Assessment of the Belthis survey in Belgium since 2011.

► 20 investors reported on their expectations for the coming year.

investment market for► Outlook on the strateg

investors will pursue in

Page 6January 2013 Real Estate Asset Investme

ange of investor groups in Belgium

t have been active

The different type of investor groups surveyed:► Banks► Closed-ended real estate funds

o come.

e in the coming

► Real estate stock corporations/REITs

► Institutional investors► Investment companies

usly in 14 other

p► Opportunity/private equity funds ► Insurance companies► Housing companies► Other investment vehicles

► The trend indicator is based on a survey Method

gian real estate

► Other investment vehicles

conducted by the Economist Intelligence Unit in November and December 2012.

► The feedback from the interviews forms the results of the real estate trend indicator.

r the year to come.gies which Belgian n the coming year.

ent Trend Indicator Belgium 2013

The same survey was conducted in o

European trend indicator: real estate assets investmen

► For the first time, the survey now has participants from 15 Eu

► All surveys took place in November and December 2012.

► Across Europe, feedback was gathered from more than 500 coactive in the real estate market in these countries.

► Austria

Participating countries► Luxembourg

► Belgium► France► Germany► Italy

g► Netherlands► Poland► Russia► Turkey


ther European countries

nt

ropean countries.

ompanies who are

► Spainp► Sweden► Switzerland► Ukraine ► United Kingdom


A clear majority views Belgium as an

70%

Belgium’s attractiveness as a location for real estate in

25%

Very attractive Attractive


Original question – “How do you rate Belgium’s overall attractiveness as a location for real e

n attractive investment location …

nvestmentsKey messages► A clear majority (95%) views Belgium

as an attractive or very attractive location to invest in real estate for location to invest in real estate for 2013. The trend has turned more favorable since the last survey (2012: 84%).

5%

Less attractive


estate investments in 2013?“

… particularly compared with other E

Belgium’s attractiin a European comKey messages

► Compared with other European countries, 85% survey participants

t B l i tt ti rate Belgium as an attractive or very attractive investment location (2012: 58%).

► Compared to last year the perceptionof Belgium in the European context

35%

of Belgium in the European contexthas obviously improved.

Very attractive


Original question – “How do you rate Belgium’s attractiveness as a location for real estate in

European countries

iveness as a location for real estate investmentsmparison

50%

10%5%

Attractive Less attractive No response


nvestments in 2013 compared with other European countries?”

With capital markets braced for unce

The Eurozone sovereign debt crisis will increase

Fear of high inflation in the medium term will drive investors toward the real estate market 50%

Due to lower loan-to-value ratios, demand for mezzanine financing will increase in 2013

investments by European investors in the real estate markets

35%

45%

The capital market in 2013 will be attractive for real estate IPOs and equity capital increases

There will be an increase in M&A activity in the real estate sector in 2013 30%

20%

35%

40%

Agree Rather agree Rather disagree


Original question – “Which of the following statements about the real estate capital market d

rtainty in 2013 …

Key messages

► Fear of high inflation (80%) drives demand for real estate (2012: 69%).

30% 20%

► Increase in European investments in real estate markets due to Eurozonecrisis (80%).

► Increasing demand for mezzanine

45%

25%

10%

5%

10%

20%

financing (70%).

► Increase in M&A activities (65%, 2012: 42%).

► Very attractive capital market for

% 15%

15%

20%

25%► Very attractive capital market for

real estate IPOs in 2013 (60%, 2012: 36%).Disagree

* In some cases no answers were provided by therespondents, which is not shown in the graph. Thus, the total might deviate from 100%.


do you agree with?”

… the Belgian real estate market cou

Key messages

► Basel III will reduce the attractiveness of the mortgage business for banks (55% 2012:

Basel III regulation will mattractive for banks and lead

business for banks (55%, 2012: 46%).

► CMBS will revive in 2013 (55%, 2012: 38%).

The commercial mortgage ba

Supply in the real estate m(maturity of structured debt, d

loans liquida► Decreased expectations for supply in

the real estate market will increase in 2013 (50%, 2012: 54%).

► Less insurance companies/pension

loans, liquida

Due to Solvency II regulationspension funds increasingly act

estate

funds are expected to act as debt providers due to Solvency II in 2013 (50%, 2012: 58%).

A


Original question – “Which of the following statements about the real estate capital market d

ld prosper

make real estate loans less d to greater restraint in the

mortgage business20% 35% 30% 15%

cked securities market will revive in 2013

arket will increase in 2013 disposal of non-performing ation of open-ended funds)

20%

40%

35%

10%

25%

35%

20%

15%ation of open-ended funds)

, insurance companies and t as debt providers for real e investments in the future

30% 20% 35% 15%

gree Rather agree Rather disagree Disagree


do you agree with?”

The Belgian real estate transaction m

25% 50Green building standards will play a more important role with respect to existing investment properties

20%

35%

45%

20%

Overall, transaction volume in 2013 will exceed the level seen in 2012

The average size of real estate deals will increase in 2013 35%

25%

20%

30%Investment activity by international real estate

investors will increase compared to 2012

g

Agree Rather agree Rather disagree


Original question – “Which of the following statements about the Belgium’s real estate transa

market …

0% 15% 10%

Key messages

► Green building standards will remain important as an investment criterion (75% 2012: 76%)

20%

15%

15%

30%

(75%, 2012: 76%).

► Significant increase in transaction volume in 2013 (65%, 2012: 19%).

► Growing deal size in 2013 15%

25%

30%

20%

(55%, 2012: 50%).

► Minor rise in activity of international investors.

Disagree



action market do you agree with?”

… is seen as robust by a majority of m

Key messages

► More portfolio deals in the commercial real estate sector (55%, 2012: 53%).

AIFM l ti l d t lid ti

There will be more commdeals i

Th d AIFM Di► AIFM regulations lead to consolidationin the fund sector (55%).

► Less than majority expect revival of more risky investments (45%).

Given the limited amouninvestors will shift the

The proposed AIFM Direcconsolidation in the

► Speculative project developments are not widely anticipated (40%). Speculative project develo


Original question – “Which of the following statements about the Belgian real estate transact

market participants

20% 35% 30% 15%mercial real estate portfolio n 2013 compared to 2013

ti ill l d t i i 15%

30%

40%

15%

35%

45%

10%

10%nt of prime stock available, eir focus to more risky real

estate investments

ctive will lead to increasing e real estate funds industry

20% 20% 40% 20%opments will return in 2013

Agree Rather agree Rather disagree Disagree


tion market do you agree with?”

Price trend expectations vary greatly

OfficeKey messages ► Prices for office buildings in prime

locations will increase (60%) or will remain stable (30%) (2012: increase

60%

35%, no change 42%).► Price levels for retail buildings in

secondary locations will be veryattrative (increasing 55%, 2012: 31%) stable 40% 2012: 38%)

30%35%

45%

25%31%), stable 40%, 2012: 38%).

► Price stability is expected for office (45%) and retail buildings (40%) in secondary locations (2012: office 35%, retail 38%) Increase No chanretail 38%).

► In peripheral areas, respondents anticipate stable price levels for office (55%) and retail buildings (55%) in 2013 (2012: office 38%, retail 34%).

Prime Secondary

Increase No chan


Original question – “How do you expect purchase prices to develop in 2013 based on the typ

y depending on location …

Retail

55%

55% 55%

%

20% 20%

35% 35%30%

40%

30%

10%

20% 20%

nge Decrease

5%

15%

Increase No change DecreasePeripheral areas

nge Decrease Increase No change Decrease


pe of use and location?”

… and type of use

Residential Hospitality

60%55%

50% 50

25% 25%

45%

35%30%

50% 50

15%15% 15%

Increase No change Decrease

15%

5%

Increase No ch

Prime Secondary Peripheral areas

g



Key messages ► A significant majority of respondents

expect stable development of prices for premium residential locations

0%

60%

(60%, 2012: 48%).► Respondents assume a stable develop-

ment of prices for the hospitality sector in prime (50%, 2012: 19%), secondary(50% 2012 48%) d i h l 20%

0%

30% 30%

(50%, 2012: 48%) and peripheral areas(60%, 2012: 43%).

► Fewer repondents assume an increase in prices for premium residential (25%, 2012: 32%) and hospitality (30%

20%

hange Decrease 2012: 32%) and hospitality (30%, 2012: 43%) properties.

g




Page 16January 2013 Real Estate Asset Investmeent Trend Indicator Belgium 2013

The Industrial sector is seen as stabl

70% 70%

IndustrialKey messages ► A clear majority of respondents

anticipate a stable price level for industrial buildings in prime (70%), secondary (70%) and peripheral areas (65%).

5%10% 10%

Increase No chan

Prime Secondary




g

e

65%

25%20%

15%20%

nge Decreaseg

Peripheral areas



Which seller groups will be the most

35%

20%

45%

60%

Residential real estate companies

Opportunity/PE funds

Seller groups

45%

20%

30%

55%

Other international funds

Banks

10%

5%

30%

65%

60%

30%

Corporates (non-property)

REOC/REITs

Closed-ended funds (real estate)

15%

10%

20%

40%

45%

30%

Public sector

Insurance companies/pension funds

O d d f d ( l t t ) 20% 30%Open-ended funds (real estate)

Active Moderately active Cautious


Original question – “Which seller groups do you think will be active in Belgium in 2013?”

active in Belgium in 2013 …

20%

20%

Key messages ► Residential real estate companies

would continue to remain the most active seller group again in 2013

25%

25%

active seller group again in 2013. ► Opportunity/PE funds will be

significantly more active in 2013.► Continuing last year‘s trend, banks

would continue to play active to 25%

35%

40%

would continue to play active to moderate role as sellers.

► Open-ended funds will play a more cautious role as sellers in 2013.

45%

45%

50%50%



… and who will be the buyers in Belgi

Insurance companies/pefunds

R id ti l l t t

Buyer groupsKey messages ► Insurance companies/pension funds,

residential real estate companies and banks will remain among the most Residential real estate comp

B

Opportunity/PE

banks will remain among the most active buyer groups in 2013.

► Closed-ended funds (real estate) and international are expected to be less active on the buy side in 2013.

REOC/

Open-ended funds (real es

Private/family

less active on the buy side in 2013.

Private/family

Sovereign wealth

Other international

Closed-ended funds (real es



Original question – ”Which buyer groups do you think will be active in Belgium in 2013?”g

um?

25%

50%

60%

30%

15%

20%

ension

i 50%

25%

35%

30%

55%

30%

20%

20%

30%

panies

Banks

funds

25%

25%

15%

40%

40%

50%

35%

30%

35%

REITs

state)

office 15%

10%

5%

50%

45%

50%

35%

45%

40%

office

funds

funds

30% 20% 50%state)

Active Moderately active Cautious


Limited availability of debt fundings asuccessful transactions in 2013 successful transactions in 2013 …

65%Limited availability of senior debt funding

Transaction impediments

50%

25% 45%

Level of equity required

Limited availability of junior debt funding

35%

10% 25%New laws and regulations

Price mismatch between buyers and sellers

10% 25%

Agree Rather Agree Ra


Original question – “Do you agree or disagree that the following will be impediments to Belgi

are the most significant barrier to

15% 10% 10%

Key messages ► Again, limited availability of senior

debt funds (80%, 2012: 72%) and availability of junior debt funding

20% 25%

20%

5%

10%

availability of junior debt funding (70%, 2012: 50%) will be the greatest impediments for deal flows.

► Price mismatch between buyers and sellers will be another major barrier

40% 20%

50%

5%

15%

jfor transactions (75%, 2012: 46%).

► Minority (35%) assume the introduction of new laws and regulations to act as hurdle to

50% 15% successful transactions.

ather disagree Disagree



um's deal flow in 2013?”

… and increased enforcement is the pdistressed loansdistressed loans

Key messages ► Increased enforcement (65%, 2012:

31%) and a prolongation of the repayment period (65% 2012: 65%)

Approaches to dea

repayment period (65%, 2012: 65%) will be the preferred ways to deal with distressed loans.

► Consensual restructuring of dealscontinues to play an increasingly

Ex

p y g yminor role in 2013 (35%, 2012: 46%).

Replacement of real Replacement of real

Consens



Original question – “Which actions do you expect banks to take regarding distressed loans ing

preferred way to deal with

45% 20% 20% 15%Enforcement

aling with distressed loans

10% 55% 20% 15%xtend repayment period

25%

25%

30%

30%

35%

25%

10%

20%

Debt-for-equity swaps

estate asset managers 25%

15%

30%

20%

25%

45%

20%

20%

estate asset managers

sual restructuring deals



n Belgium?“

The following types of use will be pop

Strong or moderate investment focus

30% 30%

20%

30%

25%

30%

15%

25%

15%

10%

Strong Moderate

Office Retail Residential Other


Original question – “Which types of use are you particularly focusing your investments on in

pular …

Key messages ► Retail properties will have the

highest focus for investors (25%, 2012: 19%)2012: 19%).

► Office buildings declined significantly in importance from last year, but continue to be one of the top investment priorities (50%,

25%

p p ( ,2012: 80%).

► Residential buildings also declined significantly in importance from last year (40%, 2012: 62%).



2013 compared with last year?“

… and not so popular with investors i

Low or no investmKey messages ► Half of repondents will have no

investment focus on office buildings in 2013 (50% 2012: 8%)in 2013 (50%, 2012: 8%).

30%

4

30%

0%

Low



Original question – “Which types of use are you particularly focusing your investments on in g

n 2013

ment focus

50%

40%

30% 30%

15%20%

30% 30%

No focus

Office Retail Residential Other


2013 compared with last year?“

Brussels and Namen/Namur will be thamong office investors in 2013; demamong office investors in 2013; demAntwerp…

Office and retail focus

35%35%

25%

30%

25%

30%

20%

25%

10%

15%

Office RetBrussels Namen/Namur Liège/Luik Antwerp Ghent


Original question – “Which locations are you particularly focusing your investments on in 20

he most sought after destinations and for retail will be strongest in and for retail will be strongest in

Key messages► Brussels (35%, 2012: 58%) and

Namen/Namur (30%, 2012: 12%) attract the highest investor demand attract the highest investor demand for offices in 2013.

► Mixed trend for the preferred destination for retail investment.

► Antwerp (30%) are the most

30%

25%

► Antwerp (30%) are the mostanticipated cities for retail investments.

► Altogether, differences in retail location demand have shrunk in

15%

comparison to previous years.tail

Mons/Bergen



13 compared with last year? “

… and Ghent will again be the preferrinvestors in 2013investors in 2013

Residential and “Key Messages► Again, Ghent (30%) will be the

preferred target for residential investments (2012: 30%)investments (2012: 30%).

► Apart from Brussels, investor‘s demand for residential properties seems to be equally distributed.

► Overall there is no clear investor 25% 25%

► Overall, there is no clear investor focus on any property type for any of the major cities in Belgium.

5%

ResidBrussels Nam



Original question – “Which locations are you particularly focusing your investments on in 20g

red target among residential

no focus“

45%

35%

25% 25%30%

35%

25%20%20%

dential No focusmen/Namur Liège/Luik Antwerp Ghent Mons/Bergen


13 compared with last year? “

The main exit channels in 2013

Planned exit strategies

35%

20%

25%

35%

10%

2013

Real estate operating companies/REITs Mutual funds Closed-ended funds Trade


Original question – “What exit strategies do you have planned (more than one answer possib

Key messages► Trade sales have gained significant

importance in acting as the preferred exit channel for the investor (35%)exit channel for the investor (35%).

► Mutual funds have lost relevance in the current scenario (10%).

► Closed-ended funds still remain one of the preferred exit strategies of the preferred exit strategies (25%).

10%

e sale Other



ble)?“

Summary


Summary of participants’ perceptions

Outlook for Belgium Attractiveness

► A clear majority view Belgium as an attractive or veryattractive real estate investment location for 2013 (92012: 84%).

► Compared with other European countries, survey participants rate Belgium as an attractive or very attrinvestment location (85%, 2012: 58%).

Real estate financial/capital market

► Fear of high inflation drives demand for real estate (82012: 69%).

► Increase in European investments in real estate marketo Eurozone crisis (80%).

Real estate transaction market

► Green building standards remain important as an investment criterion (75%, 2012: 76%).

► Significant increase in transaction volume in 2013 (6► Significant increase in transaction volume in 2013 (62012: 19%).

Purchase price expectations

► Prices for office buildings in prime locations are expec


increase (60%, 2012: 35%).

► A significant majority of respondents expect stable

y 95%,

► A significant majority of respondents expect stable development of prices for premium residential locations (60%, 2012: 48%).

Seller/buyer groups► Residential real estate companies (80% 2012: 88%) and

ractive

► Residential real estate companies (80%, 2012: 88%) and opportunity/PE funds (80%, 2012: 58%) will be among the most active sellers in 2013.

► Insurance companies/pension funds (85%, 2012: 73%) and residential real estate companies (80%, 2012: 69%) will

80%,

ets due

residential real estate companies (80%, 2012: 69%) will remain among the most active buyer groups in 2013.

Greatest deal impediments► Limited availability of senior debt funds (80%, 2012: 72%)

and junior debt funds (70% 2012: 50%) will be the greatest

5%

and junior debt funds (70%, 2012: 50%) will be the greatest impediments for deal flows.

Bank actions to handle distressed loans ► Increased enforcement (65%, 2012: 31%) and a prolon-

gation of the repayment period (65% 2012: 65%) are 5%,

cted to

gation of the repayment period (65%, 2012: 65%) are preferred ways to deal with distressed loans.


Perceptions of the Belgian real estate m

Outlook for Belgium Real estate use types► Retail properties will have the highest focus for inv

(25%, 2012: 19%). ► Office buildings declined significantly in importanc

last year, but continue to be one of the top investmpriorities (50%, 2012: 80%).

Preferred regions

► With regard to office properties, Brussels (35%, 20g p p , ( ,58%) and Namen/Namur (30%, 2012: 12%) show thighest investor demand for 2013.

► Antwerp (30%) are preferred cities for retail investmin 2013.

► Again, Ghent (30%, 2012: 30%) is the preferred tafor residential investments.


market

vestors

e from

Exit strategies ► Trade sales have gained significant importance in acting

as the preferred exit channel for the investor (35%).► Mutual funds have lost relevance in the current scenario

10%)ment

012:

10%).► Closed-ended funds still remain one of the preferred exit

strategies 25%).

he

ments

rget


Real Estate Asset Investment Trend Indicator Europe 2013Trend Indicator Europe 2013


Executive Summary

Outlook EuropeAttractiveness► The vast majority of countries are rated as attractive or

very attractive by market participants.► Non-Eurozone countries are currently seen as more

attractive than euro countries than countries inside the currency zone.

► Spain and Italy are viewed with caution► Spain and Italy are viewed with caution.

Real estate capital market► In almost all countries, the Eurozone crisis and fear of

inflation is expected to stimulate transaction activity.N l d l ti ( B l III d S l II) ► New laws and regulations (e.g. Basel III and Solvency II) are expected to impact upon real estate financing.

Real estate transaction market► Most investors anticipate a rise in transaction volume −p

fostered to an extent by international investors.► Green-building standards are set to play an important

role in almost all countries surveyed.► Speculative project developments are set to return

slowly in many markets


slowly in many markets.

Purchase price expectations► The growth potential for prime offices is recognized in most

countries.► Retail prices are expected to increase or at least remain

stable in many prime locations.► Price trends for residential real estate are generally seen as

very promising and even stable in peripheral locationsvery promising and even stable in peripheral locations.

Seller and buyer groups► Most active sellers in 2013: opportunity/PE funds, banks

and closed-ended funds.M t ti b i 2013 t it /PE f d i t ► Most active buyers in 2013: opportunity/PE funds, private investors and family offices.

Investment focus► Generally, investors will be less focused on office properties y, p p

in 2013. Strong interest is seen in only a few countries. ► Demand for retail properties is mostly seen as strong to

moderate.► Very strong demand is expected for residential real estate in

most countries


most countries.

Some non-Eurozone countries are peas being particularly attractiveas being particularly attractive

Attractiveness oKey messages

► Some non-euro countries (Sweden, Turkey and to an extent the UK) are particularly attractive This might be

58%

60%particularly attractive. This might be a reflection of the continuing difficulties in the Eurozone.

► Compared to other countries, market participants in Germany the

1%

5%

8%

71%

58%

70%

60%

market participants in Germany, the UK and Poland perceive their domestic markets as being the most attractive.

9%

10%

13%

19%

63%

45%

64%

48%

► The countries that are viewed as suffering most from the Eurozone sovereign debt crisis are Italy and Spain.

20%

22%

33%

63%

50%

62%

46

Very attractive Attractiv

70%

* In some cases no answers were provided by the respondents, which is not shown in the graph. Thus, the total might deviate from 100%.


Original question – “How do you rate your country’s attractiveness as a location for real esta

rceived by their market participants

of your market In comparison to other countriesSweden

Turkey

L b

42%

40%

50%

45%

46%

50%

4%

5%

Luxembourg

Germany

Belgium

Switzerland

UK

29%

41%

25%

32%

53%

69%

35%

44%

41%

30%

50%

42%

6%

1%

10%

14%

UK

Poland

Russia

Austria

28%

45%

23%

33%

49%

45%

37%

24%

51%

55%

46%

62%

17%

14%

Ukraine

Netherlands

France

Spain

%

6%

20%

30%

16%

21%

17%

10%

38%

46%

20%

60%

56%

28%

7%

30%

6%

26%

73%

ve Less attractive

Italy30% 30% 70%


ate investments in 2013? And compared to other countries in Europe?”

The Euro crisis and fear of inflation isactivity in a number of marketsactivity in a number of markets

Perceptions of thKey messages

► The Eurozone sovereign debt crisis is expected to stimulate transaction volume in most of the countries

5%

8%

12%

47%

46%

volume in most of the countries surveyed.

► Expectations of increases in property investment are most significant in G ki d F h

12%

10%

10%

6%

10%

18%

14%

24%

45%

55%

19%

German-speaking and French-speaking countries.

► Investment activity in non-Eurozone countries is affected less than in

15%

16%

7%

25%

10%

16%

27%

15%

35%

36%

15%

Eurozone countries.

► However, respondents still perceive some countries to be struggling with the consequences of the Eurozone

35%

37%

33%

27%

10%

6%

13%

33%

10%

21

17

Original question: “Do you agree with the following statements: The Eurozone sovereign deb

qsovereign debt crisis.

Agree Rather agree

50% 1



Original question: Do you agree with the following statements: The Eurozone sovereign debFear of high inflation in the medium term will drive investors towards the real estate market

s expected to stimulate transaction

49%

42%

42%

44%

8%

7%

1%

7%

he euro crisis Fear of inflation45%

37%

Germany

France58%

50%

29%

43%

24%

30%

52%

38%

20%

16%

18%

19%

58%

35%

24%

57%

Luxembourg

Belgium

Switzerland

Austria

60%

34%

33%

50%

15%

44%

37%

30%

15%

16%

17%

5%

10%

6%

10%

15%

52%

%

40%

16%

30%

45%

Poland

Netherlands

Russia

Ukraine

55%

45%

34%

23%

20%

25%

29%

27%

11%

4%

23%

25%

19%

29%

27%

1%

7%

20%

45%

34%

37%

20%

Turkey

UK

Sweden

Spain

10% 10% 60% 20%

bt crisis will increase investments by European investors in the real estate markets /

Rather disagree Disagree

15% 20% 15% Italy


bt crisis will increase investments by European investors in the real estate markets. / ."

With regard to real estate financing, potential impacts of Basel IIIpotential impacts of Basel III

43%

37%

59%

Basel III regulations Solvency II reAustria2)

Sweden

UK

10%

13%

6%

5%

4%

13%

52%

33%

19%

33%

50%

62% 59%

43%

28%

33%

UK

Germany

Netherlands

France

l d2)

6%

9%

9%

13%

20%

19%

21%

19%

54%

25%

37%

62%

25%

47%

33%

35%

64%

5%

55%

2

58%

Poland2)

Luxembourg

Switzerland1)

Ukraine1) 2)

20%

24%

30%

15%

12%

32%

10%

20%

24%

42%

20%

45%

40%

21%

40%

27%

40%

25% 15%

Russia1)

Spain

Turkey1)

Italy

Question not inclu

10%

17%

25%

35%

30%

27%

20%

10%

30%

36%

5%

25%

30%

20%

50%

30%

30% 20%

Original question – “Do you agree with the following statement: Basel III regulation will make

Belgium


15% 30% 35% 20%


Original question Do you agree with the following statement: Basel III regulation will make business. / Due to Solvency II regulation, insurance companies and pension funds increasingl

Solvency II could offset some of the

42%

33%

21%

17%

9%

10%

13%

9%

Key messages

► All countries surveyed expectBasel III to restrict bank lending in the property markets

egulations

21%

46%

44%

42%

9%

10%

25%

9%

9%

3%

16%

the property markets.

► On the other hand, respondents think Solvency II will make it attractive for other debt providers, such as insurance companies to fill 25%

18%

20%

12%

26%

10%

20%

6%

35%

such as insurance companies, to fill that gap.

► In countries that might suffer most from Basel III, market participants

50%

20%

10%

23%

25%

13%

17%

35%

expect insurance companies and pension funds to take over the role of banks as alternative lenders.uded in Turkish survey

1) Not a member of the European Union, Solvency II not

35% 15%

real estate loans less attractive for banks and lead to greater restraint in the mortgage

legally binding.2) Not a member of the Basel Committee on Banking Supervision, Basel III not legally binding.



real estate loans less attractive for banks and lead to greater restraint in the mortgage ly act as debt providers for real estate investments in the future."

Transaction volume expected to rise, investmentsinvestments

Transaction voluKey messages

► The vast majority of respondents expect a higher transaction volume in 2013 than in 2012

12%

13%

5%

3%

12%

6%

41%

48%in 2013 than in 2012.

► In Luxembourg, the Netherlands, France, the UK, and Turkey, more than three quarters of interviewees expect transaction volume to

5%

15%

20%

12%

2%

25%

48%

36%

5%

56%

expect transaction volume to increase.

► There is a significant rise in the expectation of increased volume

17%

25%

7%

15%

13%

5%

23%

20%

29%

25%

37%

4

compared to 2012.

► This is fostered by international investors looking for new investment opportunities.

14%

15%

17%

14%

25%

33%

45%

43

10%

Original question – “Do you agree with the following statement: Overall transaction volume

pp

Agree Rather agree

35% 30%



Original question Do you agree with the following statement: Overall, transaction volume investors will increase compared to 2012.”

driven partly by international

58%

41%

23%

18%

31%

54%

6%

9%

14%

18%

19%

9%

me Cross-border activity82%

43%

35%

58%

41%

23%

18%

31%

54%

6%

9%

14%

18%

19%

9%

Luxembourg

Netherlands

France 23%

51%

60%

20%

54%

30%

10%

66%

14%

11%

5%

14%

9%

8%

25%

%

35%

47%

70%

19%

23%

51%

60%

20%

54%

30%

10%

66%

14%

11%

5%

14%

9%

8%

25%

France

UK

Turkey

Germany

37%

45%

23%

25%

33%

20%

30%

30%

17%

10%

37%

25%

13%

25%

10%

20%45%

41%

45%

33%

20%

37%

45%

23%

25%

33%

20%

30%

30%

17%

10%

37%

25%

13%

25%

10%

20%

Sweden

Ukraine

Russia

Belgium

34%

30%

27%

16%

33%

20%

20%

50%

14%

25%

20%

29%

19%

25%

33%

3%

33%

39%

29%

50%

17%

11%

34%

30%

27%

16%

33%

20%

20%

50%

14%

25%

20%

29%

19%

25%

33%

Austria

Poland

Spain

Switzerland

5% 20% 30% 45%

in 2013 will exceed the level seen in 2012 / Investment activity by international real estate

Rather disagree Disagree

15% 20% 5% 20% 30% 45%Italy


in 2013 will exceed the level seen in 2012. / Investment activity by international real estate

Environmental sustainability standarmany marketsmany markets

AustriaLuxembourg

ImpoKey messages

► Respondents in almost all countries expect green-building standards to play an important role

SwitzerlandTurkey

Sweden

Germany

play an important role.

► This development could be influenced by the requirements of institutional investors and national building standards Netherlands

PolandBelgium

France

building standards.

RussiaUkraine

UKItaly

Spain

Agr* In some cases no answers were provided by the respondents, which is not shown

in the graph. Thus, the total might deviate from 100%.


Original question – “Do you agree with the following statement: Green-building standards wil

rds will play an important role in

57%

88%

33% 5% 5%

12%

ortance of green-building standards

32%

60%

45%

27%

55%

25%

38%

53%

8%

4%

19%

15%

13%

1%

40%

45%

25%

21%

38%

30%

50%

49%

16%

20%

15%

28%

6%

5%

10%

2%

23%

50%

39%

45%

43%

15%

21%

10%

27%

10%

17%

15%

7%

25%

21%

30%

20% 20% 30% 30%

ree Rather agree Rather disagree Disagree


ll play a more important role with respect to existing investment properties.”

Speculative project developments armarketsmarkets

SpecKey messages

► In just a few countries (France, Russia, Luxembourg, and Poland), a majority of participants anticipate

France

Russiamajority of participants anticipate the return of speculative developments.

► In Germany, Italy and Sweden, a high degree of pre letting is expected to

Luxembourg

Poland

Turkey

Netherlandsdegree of pre-letting is expected to be a prerequisite for project developments to gain financing.

1

10%

Austria

Ukraine

Belgium

Spain

1

5%

3%

15

UK

Switzerland

Germany

Italy

Agr

4% 8Sweden



Original question – “Do you agree with the following statement: Speculative project developm

e expected to return slowly in many

culative project developments

28%

37%

45%

30%

16%

17%

9%

13%

53%

25%

35%

22%

6%

30%

15%

22%

6%

20%

30%

28%

35%

25%

20%

28%

19%

40%

20%

24%

20%

27%

19%

20%

40%

17%

38%

40%

20%

46%

19%

5%

17%

29%

25%

10%

25%

37%

56%

35%

39%

21%

15%

40%

ree Rather agree Rather disagree Disagree

8% 17% 67%


ments will return in 2013."

Investors in most countries acknowleoffice property office property

/Price trends, office property (prime/periphery)

RU

SWE

NL 532819 28

31

41

25

62

13 850

42

3557

8 2669

GBPL

GER

BEL

59356 24

47

29

4030

30 1540

455840

2 2830

42

351UALUX

603010 25

55

20

CH72

199 3344

23F AT6233

5 19

4338

I 1540 15

24

3929 24

68

SP 10

5733 30

3040

4540 2065



edge growth potential for prime

Key messages► In almost all countries surveyed,

office property prices in prime locations are expected to remain

US 50437 33

50

17

pstable or grow.

► However, in Spain, Italy, Sweden, and Switzerland, the growth perspective even in prime locations seems to be

5510

453520

e e p e ocat o s see s to besomewhat limited compared with other countries.

► Growth potential for office prices in peripheral locations is seen 35 peripheral locations is seen especially in countries located in the Eastern part of Europe.

Increasing stable decreasing

LegendPrime Periphery

39 1937

652015

2010TR



pe of use and location?”(percentage results)11

5044

37

Stable or rising retail prices expected

i t dPrice trends, reKey messages► In most countries, the majority of

respondents expect prices for retail property in prime locations to

NL 4728

25 25

4134

increase or at least remain stable.► Expectations of rising prices in prime

locations are strongest in Austria, Luxembourg, and Turkey.

24

4135

642412

GBEL

LUX

3535

30 30

55

15► As for office properties, further growth potential is seen for retail properties in peripheral locations in countries located in the Eastern part

F4

pof Europe as well as in France.



(percentage results) )39

5019

4437

SP 23

3047

7

537



Original question – “How do you expect purchase prices to develop in 2013 based on the typ(percentage results) )11 44

d by majority of investors

t il t i / i hetail property (prime/periphery)

RUS

SWE

4344

1343

40

17

17

66

17 25

3342

114 232

43531 3

4844

GBPL

GERUA

25

60

15 20

3545

3649

114 231560

2

504010

4040

20

CH AT

I

6733 24

43334449

744

40

16

2015

16

55

21 2465

I

TR

202555

15

4540

56

60355

1515



In some countries, residential will be

/Price trends, residential property (prime/periphery)

SWE

NL 443422 16

3846

454213 8

5933

7520

5 15

65

15

GB

PLGER

BEL

UALUX

25

60

1545

3515

533512

4135

24

4025

35 153550

6626

8 1740

43

CHF AT

I

71245 33

53

1446

3519 33

44

21

2525 153055

55343 13

63

16

SP 503055

10

6423

327

3340



a clear “buy”

Key messages► The expectation that residential

property prices in prime locations will rise is particularly strong in

RUS40

573 20

4337

Germany, Austria, the UK and Switzerland.

► Even in peripheral locations, residential real estate prices are

A 25

50

25 3550

15

generally expected to be stable in most markets.

50 50



(percentage results) )39

5019

4437

TR5535

5 51515



pe of use and location?”(percentage results) )11 44

Top seller and buyer groups by count

Key messages► Throughout Europe, residential real

estate companies, banks, and opportunity/PE-funds are expected

TOP seller gResidential real estate companies (other international funds (71%)

Residential real estate companies (funds (80%) other international fun

Banks (79%) open-ended funds (reto be among the most active sellers in 2013.

► In a majority of the countries surveyed, private investors and

Banks (79%), open ended funds (reinternational funds (69%)

Open-ended funds (real estate) (90funds (89%), opportunity/PE-funds

Insurance companies/pension fundestate companies (45%), opportun

REOC/REITs (94%), closed-ended f

family offices are expected to become more active as buyers.

► Besides being on the seller side, opportunity /PE funds are regarded

/ ( ),opportunity/PE funds (82%)

Public sector (88%), residential reabanks (79%)

Closed-ended funds (real estate) (7companies/pension funds (75%), o(65%)B k (80%) bli t (77%) R

pp y gas very active on the buying side.

Banks (80%), public sector (77%), R

REOC/REITs (57%), banks (53%), cestate) (50%)

Residential real estate companies (insurance companies/pension fund

Banks (87%) corporations (non-proBanks (87%), corporations (non prointernational funds (59%)

Residential real estate companies (property) (90%), other internationaOpen-ended funds (real estate) (77REOC/REITs (72%)

•In some cases no answers were provided by the respondents, which is not shown in the graph. Thus, the total might deviate from 100%. •Ukraine was excluded from this question.


Original question – “How active do you think the following seller/buyer groups will be in the r

try

groups TOP buyer groups (81%), REOC/REITs (76%),

AustriaOpportunity/PE funds (95%), private/family office (90%), insurance companies/pension funds (86%)

(80%), opportunity/PE-nds (75%) Belgium

Insurance companies/pension funds (85%), residential real estate companies (80%), banks (80%)

eal estate) (72%) other Closed-ended funds (real estate) (75%) sovereign wealth eal estate) (72%), other France

Closed ended funds (real estate) (75%), sovereign wealth funds (75%), banks (72%),

0%), other international s (88%) Germany

Private/family office (93%), insurance companies/pension funds (92%), other international funds (89%)

ds (50%), residential real ity/PE funds (40%) Italy

Insurance companies/pension funds (60%), opportunity/PE funds (55%), closed-ended funds (real estate) (55%)

unds (real estate) (88%), Opportunity/PE funds (88%), residential real estate companies ( ) ( ),Luxembourg

pp y/ ( ), p(88%), insurance companies/pension funds (88%)

al estate companies (79%), The Netherlands

Sovereign wealth funds (81%), private/family office (72%), other international funds (69%)

75%), insurance opportunity/PE funds Poland

REOC/REITs (85%), opportunity/PE funds (80%), sovereignwealth funds (75%)

REOC/REIT (76%) REOC/REIT (90%) i t /f il ffi (87%) i REOC/REITs (76%)Russia

REOC/REITs (90%), private/family office (87%), sovereign wealth funds (70%)

losed-ended funds (real Spain

Open-ended funds (real estate) (50%), banks (44%), REOC/REITs (40%),

(87%), REOC/REITs (87%), ds (79%) Sweden

REOC/REITs (88%), closed-ended funds (real estate) (87%), insurance companies/pension funds (83%)

operty) (74%) other Open-ended funds (real estate) (87%) insurance operty) (74%), other Switzerland

Open ended funds (real estate) (87%), insurance companies/pension funds (81%), REOC/REITs (81%)

(95%), corporations (non-al funds (85%) Turkey

Residential real estate companies (75%), private/family office (75%), REOC/REITs (75%)

7%), banks (75%), UK

Opportunity/PE funds (73%), private/family office (72%), sovereign wealth funds (70%)


real estate market in 2013?”

Investors to focus less on office prop

Investment focus: office property

SWE

NL 193416

31

6725

4 4

GB

PLGER

BEL

LUX

203050

1224

1246

203525

20

25

321726

22

4315

13

CHF AT

I

104229

1946

40

122

30

18

3921

11

SP3020

501033

1740


Original question – “Compared with 2012, what kind of focus do you intend to give to the fo

perties in 2013 …

Key messages► Compared with last year’s survey,

investors are set to focus less on office properties.

RUS 23

471317

► Only investors in Sweden, Turkey, and France show a very strong interest in office properties.

I id d b th d t hi h i t h

strong moderate low

Legend

(percentage results)

21

4421

14no focus

TR6520

15

•In some cases no answers were provided by the respondents, which is not shown in the graph. Thus, the total might deviate from 100%. •Ukraine was excluded from this question.


llowing real estate use types in your investment strategy for 2013?”

… while demand for retail is holding u

Investment focus: Key messages► Investors in most countries still

concentrate at least to some extent on retail properties.

G

NL

BEL 2515

223119

28

► In Italy and Spain, retail investments will only play a minor role.

1812658

G

F

BEL

LUX

3030

SP

F

72327

strong moderate low

Legend


21

4421

14no focus

2343

27* In some cases no answers were provided by the respondents which is not shown

in the graph. Thus, the total might deviate from 100%.


Original question – “Compared to 2012, what kind of focus do you intend to give to the follo

up

retail property

17

GB

RUS

SWE

3347

137

5029417

231521

CH

GB

PLGER

AT

UA

10195

20

451520

4115

25

351030

3731

816

CH AT

I

3347

1010

433319

4015

45

1126

26

21

TR 3550510


wing real estate use types in your investment strategy for 2013?”

Due to favorable price expectations, buyer listsbuyer lists

t t f id ti l tInvestment focus: residential property

SWE

NL 252525

25

331325

29

6241252

GB

PLGER

BEL

UALUX

1525

40

20

153525

25

26

361919

65112 15

CHF AT

I

47331010

4235

149

4045

472483

SP40

1545

1027

36

27


Original question – “Compared to 2012, what kind of focus do you intend to give to the follo

residential can be found on many

Key messages► Residential properties are in strong

demand in most of the countries surveyed, except Italy, Spain, and Luxembourg.

► Residential properties are highly sought after by investors in Germany and Switzerland.

RUS 23

3727

13

301530

2515

strong moderate low

Legend


21

4421

14no focus

TR45

251515



wing real estate use types in your investment strategy for 2013?”


This publication contains information in summary form and is therefore intended for general guidance only. Although prepared with utmost care this publication is not intended to be a substitute for detailed research or the exercise of professional judgment. Therefore no liability for correctness, completeness p j g y , pand/or currentness will be assumed. It is solely the responsibility of the readers to decide whether and in what form the information made available is relevant for their purposes. Ernst & Young cannot accept any responsibility. On any specific matter, reference should be made to the appropriate advisor.


Tristan Dhondt

Tel.: +32 2 774 60 17Mobile: +32 497 480 486Email: tristan.dhondt@be

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Real Estate Asset Investment Trend Indicator