An Overview of the An Overview of the European Property European Property

Investment Markets Investment Markets

By King SturgeBy King Sturge

Average GDP Growth forecastAverage GDP Growth forecastAs at Dec 2000 As at June 2001

Belgium 2.18 2.30UK 2.40 2.40France 2.70 2.50Spain 3.23 3.13Portugal 3.00 2.73Italy 2.50 2.38Germany 2.55 2.38Holland 3.05 2.85Denmark 2.23 2.20Austria 2.70 2.65Switzerland 2.18 2.35Ireland 6.65 6.48C&E Europe 3.30 3.75

Office Yield TrendsOffice Yield Trends

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

1999 2000 2001

Brussels

London

Paris

Madrid

Lisbon

Milan

Frankfurt

Amsterdam

Copenhagen

Vienna

Zurich

Dublin

Office Yield TrendsOffice Yield Trends1999 2000 2001

Brussels 6.45 - 7.00 6.45 - 7.00 6.45 - 7.00

London 5.50 5.50 5.75

Paris 5.50 5.50 5.75

Madrid 4.75 - 5.25 5.75 - 6.00 5.50 - 6.00

Lisbon 7.50 6.75 7.00

Milan 5.50 5.50 5.25 - 5.50

Frankfurt 4.90 - 5.50 4.90 - 5.60 4.80 - 5.40

Amsterdam 5.57 - 6.00 5.75 - 6.00 6.00 - 6.25

Copenhagen 6.00 - 6.50 6.00 - 6.50 6.00 - 6.50

Vienna 5.15 - 5.90 5.10 - 5.85 4.75 - 5.50

Zurich 5.25 - 6.75 5.25 - 6.75 5.75

Dublin 4.75 - 5.25 4.50 - 5.00 4.75 - 5.25

Retail Yield TrendsRetail Yield Trends

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

1999 2000 2001

Brussels

London

Paris

Madrid

Lisbon

Milan

Frankfurt

Amsterdam

Copenhagen

Vienna

Zurich

Dublin

Retail Yield TrendsRetail Yield Trends1999 2000 2001

Brussels 6.00 - 7.25 6.00 - 7.25 6.00

London 5.00 5.50 5.50

Paris 6.50 6.50 6.25 - 6.75

Madrid 5.50 6.00 - 6.50 5.75 - 6.50

Lisbon 7.50 6.75 6.75

Milan 5.00 5.00 4.50 - 5.00

Frankfurt 4.75 - 5.50 4.50 - 5.75 4.50 - 5.50

Amsterdam 5.75 - 6.25 5.75 - 6.25 6.00 - 6.50

Copenhagen 6.00 - 6.50 6.00 - 6.50 6.00 - 6.50

Vienna 4.50 - 5.00 4.50 - 5.00 4.50 - 5.00

Zurich 7.00 7.00 5.50

Dublin 3.75 - 4.00 3.70 - 4.20 3.70 - 4.25

IndustrialIndustrial Yield Trends Yield Trends

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

1999 2000 2001

Brussels

London

Paris

Madrid

Lisbon

Milan

Frankfurt

Amsterdam

Copenhagen

Vienna

Zurich

Dublin

Industrial Yield TrendsIndustrial Yield Trends1999 2000 2001

Brussels 9.13 8.75 8.80

London 6.00 - 6.25 6.00 - 6.25 6.00 - 6.25

Paris 12.00 11.00 9.25

Madrid 8.00 - 9.00 7.75 - 9.00 7.70 - 8.50

Lisbon 9.50 9.00 9.00

Milan 9.00 9.00 8.00 - 8.50

Frankfurt 7.50 7.50 7.50

Amsterdam 8.50 8.25 8.25

Copenhagen 6.00 - 6.50 6.00 - 6.50 6.00 - 6.50

Vienna 6.00 - 7.00 6.00 - 7.00 6.00 - 7.00

Zurich 9.00 9.00 9.00

Dublin 6.5 - 7.375 6.50 - 7.25 6.50 - 7.25

Yield TrendsYield Trends

• Stabilizing yields rather than the Stabilizing yields rather than the much anticipated harmonizationmuch anticipated harmonization

• Leases are still so different, both in Leases are still so different, both in terms of landlord’s obligations and terms of landlord’s obligations and reversionary potential - especially reversionary potential - especially but not only UK versus the restbut not only UK versus the rest

Office Rent TrendsOffice Rent Trends

0

200

400

600

800

1,000

1,200

1,400

1,600

1999 2000 2001

Brussels

London

Paris

Madrid

Lisbon

Milan

Frankfurt

Amsterdam

Copenhagen

Vienna

Zurich

Dublin

€m² p.a.

Office Rent TrendsOffice Rent Trends€ m² p.a. 1999 2000 2001Brussels 192 192 203 London 1,108 1,359 1,473 Paris 518 732 763 Madrid 288 324 500 Lisbon 263 263 263 Milan 281 281 413 Frankfurt 484 510 583 Amsterdam 306 340 340 Copenhagen 229 229 268 Vienna 253 253 253 Zurich 469 486 750 Dublin 409 464 546

Retail Rent TrendsRetail Rent Trends

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1999 2000 2001

Brussels

London

Paris

Madrid

Lisbon

Milan

Frankfurt

Amsterdam

Copenhagen

Vienna

Zurich

Dublin

€m² p.a.

Retail Rent TrendsRetail Rent Trends€ m² p.a. 1999 2000 2001Brussels 1,116 1,240 1,363 London 7,245 7,984 7,798 Paris 6,871 9,237 9,237 Madrid 1,154 1,224 1,442 Lisbon 1,197 1,197 1,316 Milan 1,020 1,020 1,549 Frankfurt 2,235 2,235 2,270 Amsterdam 930 1,363 1,363 Copenhagen 1,613 2,280 2,681 Vienna 1,395 2,180 2,180 Zurich 2,184 1,943 2,943 Dublin 2,998 3,545 3,680

Industrial Rent TrendsIndustrial Rent Trends

0

50

100

150

200

250

300

1999 2000 2001

Brussels

London

Paris

Madrid

Lisbon

Milan

Frankfurt

Amsterdam

Copenhagen

Vienna

Zurich

Dublin

€m² p.a.

Industrial Rent TrendsIndustrial Rent Trends€ m² p.a. 1999 2000 2001Brussels 50 55 68 London 205 238 242 Paris 61 69 84 Madrid 72 108 108 Lisbon 75 75 75 Milan 66 77 77 Frankfurt 99 99 99 Amsterdam 113 113 113 Copenhagen 74 101 101 Vienna 78 87 87 Zurich 94 130 131 Dublin 98 105 105

Rent TrendsRent Trends

• Growth slowing down in Growth slowing down in most marketsmost markets

• Where next?Where next?

Office Eureka ChartOffice Eureka ChartAverage 2001-2004: GDP Growth v Office Rental Growth Rankings

0

1

2

3

4

5

6

7

8

9

10

11

12

1.00 2.00 3.00 4.00

GDP Growth Average

Off

ice G

row

th R

an

k

Barcelona

Madrid

Paris

London

Amsterdam

Rotterdam

Rome

Milan

Frankfurt

Brussels

Dublin (6.48%)

Retail Eureka ChartRetail Eureka ChartAvergae 2000 - 2004: GDP Growth v Retail Rental Growth Rankings

0

1

2

3

4

5

6

7

8

9

10

11

12

1.00 2.00 3.00 4.00

GDP Growth

Ret

ail G

row

th R

ank

Dublin (6.48%)

Barcelona

Madrid

Paris

London

Amsterdam

Rotterdam

Rome

Milan

Frankfurt

Brussels

Industrial Eureka ChartIndustrial Eureka ChartAverage 2000 -2004: GDP Growth v Industrial Rental Growth Rankings

0

1

2

3

4

5

6

7

8

9

10

1.00 2.00 3.00 4.00

GDP Growth

Ind

ust

rial

Gro

wth

Ran

k

Barcelona

Madrid

Paris

London

Amsterdam

Rotterdam

Milan

Frankfurt

Brussels

European Vacancy RatesEuropean Vacancy Rates% of stock Office IndustrialBrussels 4 2

London low 5

Paris 2 6

Madrid 1 6

Lisbon 1 ~

Milan 8 low

Frankfurt 4 4

Amsterdam 1 low

Copenhagen 2 2

Vienna ~ 6

Zurich 3 ~

Dublin 2 7

United KingdomUnited Kingdom

• ProsPros

• LeasesLeases

• Market Market maturitymaturity

• EconomyEconomy

• ConsCons

• CurrencyCurrency

• Market cycleMarket cycle

• Pricing Pricing versus debtversus debt

FranceFrance

• ProsPros

• High yields for High yields for certain sectorscertain sectors

• Strong Strong economyeconomy

• Low vacancyLow vacancy

• ConsCons

• Leases (v Leases (v tenant tenant friendly)friendly)

• Reversions Reversions difficultdifficult

SpainSpain

• ProsPros

• Strong GDP Strong GDP growthgrowth

• Low vacancy Low vacancy (at present)(at present)

• ConsCons

• Low yieldsLow yields

• High rentsHigh rents

• Supply Supply increasing in increasing in certain areascertain areas

GermanyGermany• ProsPros

• Low ( current) Low ( current) vacancy rates in vacancy rates in many markets many markets

• High land pricesHigh land prices support valuessupport values

• StabilityStability

• ConsCons

• Low yieldsLow yields

• Recent very Recent very strong rental strong rental growth (in growth (in certain sectors)certain sectors)

ItalyItaly• ProsPros

• Emerging marketEmerging market

• Release of prime Release of prime real estate assets real estate assets from public sectorfrom public sector

• Euro provides Euro provides more comfort for more comfort for investorsinvestors

• ConsCons

• Maturity of Maturity of MarketMarket

• Not especially Not especially cheapcheap

• Fairly landlord Fairly landlord friendly leases friendly leases (break after 6yrs)(break after 6yrs)

BelgiumBelgium• ProsPros

• Good demand from Good demand from EU particularly if EU particularly if enlargement goes enlargement goes aheadahead

• Low rental baseLow rental base

• Yields slightly above Yields slightly above European averageEuropean average

• ConsCons

• High transfer costs High transfer costs ca.15%ca.15%

• Leases similar to Leases similar to France-tenant France-tenant friendlyfriendly

• Low GDP and Low GDP and rental growthrental growth

HollandHolland

• ProsPros

• Strong GDP Strong GDP growthgrowth

• Low vacancy Low vacancy ratesrates

• ConsCons

• Certain Certain markets (eg markets (eg Amsterdam Amsterdam offices) have offices) have been v strongbeen v strong

ScandinaviaScandinavia• ProsPros

• Denmark has Denmark has seen steady long seen steady long term growthterm growth

• Major Major infrastructureinfrastructure

• investmentinvestment

• ConsCons

• Sweden has had Sweden has had very strong very strong rental growthrental growth

• Investment Investment markets mainly markets mainly locallocal

SwitzerlandSwitzerland• ProsPros

• Growth has been Growth has been slower than much slower than much of EUof EU

• Possibly more Possibly more opportunities opportunities especially in Genevaespecially in Geneva

• Market cycle is Market cycle is behind much of EUbehind much of EU

• ConsCons

• Not in EUNot in EU

• Still secretiveStill secretive

• Low yields (but Low yields (but low debt rates)low debt rates)

AustriaAustria

• ProsPros

• Recent interest Recent interest from Germans from Germans and Anglo/USand Anglo/US

• Gateway to Gateway to Central Central EuropeEurope

• ConsCons

• Restricted Restricted marketmarket

• CBD not well CBD not well defineddefined

PortugalPortugal

• ProsPros

• Emerged Emerged marketmarket

• Yields high in Yields high in an EU context an EU context but have but have firmedfirmed

• ConsCons

• Lease lawLease law

• Much recent Much recent development development especially especially retailretail

IrelandIreland

• ProsPros

• GDP growthGDP growth

• US base for US base for EUEU

• Euro with UK Euro with UK style leasesstyle leases

• ConsCons

• Very high Very high recent growthrecent growth

• Labour Labour shortage shortage

• Inflation (6%)Inflation (6%)

Central EuropeCentral Europe

• ProsPros

• Yield Yield convergence convergence with Eurolandwith Euroland

• Emerging Emerging marketsmarkets

• ConsCons

• Immediate Immediate economic economic prospects mixedprospects mixed

• Rents still falling Rents still falling in some marketsin some markets

Hot SpotsHot Spots• Spanish Spanish

industrialindustrial

• DenmarkDenmark

• Central Europe Central Europe industrialindustrial

• Reversionary Reversionary Paris officesParis offices

• UK retail UK retail (oversold)(oversold)

• German German industrial industrial

• Selected Selected German offices German offices (with quick (with quick reversion)reversion)