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Global Research and Consulting
European Investment Briefing
Presented by:
Michael Haddock, Director, EMEA Research & Consulting
05/10/2010
Key themes for today’s market
The downturn was syncronised– the recovery is more uneven
Uncertainty is everywhere– not least in the economic outlook
Debt is available to buy commercial real estate– but only if you don’t need it
New allocations to real estate are coming at the
expense of bonds, not equities
Source: ECOWIN, Financial Times
10-year government bond yield
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
UK
Ge
rma
ny
Fra
nc
e
US
A
Sw
itze
rla
nd
Ja
pa
n
'Jan 08
'Jan 10
'Jul 10
23-Sep
-101 bps -73 bps-109 bps -92 bps -128 bps -30 bps
Yield shift in 2010
Changes in risk free rate
Global Research and Consulting
Investment Activity
0
10
20
30
40
50
60
70
80
Q106
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Source: CB Richard Ellis
€ Billion
Investment market turnover in Europe
-50%
0%
50%
100%
150%
200%
CEE Germany Nordics Europe UK France Benelux Iberia Italy
+250%
Source: CB Richard Ellis
H1 2010 versus H2 2009
Changes in investment market turnover
Global Research and Consulting
Economy, Occupier Markets, Vacancy & Development
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Po
lan
d
Sw
itze
rla
nd
No
rwa
y
Fra
nc
e
Be
lgiu
m
Po
tug
al
Au
str
ia
Sp
ain
Ne
the
rla
nd
s
EU
27
Cze
ch
Re
pu
blic
Gre
ec
e**
UK
Ita
ly
Ge
rma
ny
Sw
ed
en
Hu
ng
ary
De
nm
ark
Fin
lan
d
Ire
lan
d
Peak to trough decline in output (% of GDP)**still in recession as at Q2 2010
Source: Eurostat, CB Richard Ellis
Extent of the recession
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%S
we
de
n
Po
lan
d
Ge
rma
ny
Sw
itze
rla
nd
No
rwa
y
Cze
ch
Re
pu
blic UK
Fra
nc
e
Be
lgiu
m
Ne
the
rla
nd
s
De
nm
ark
EU
27
Au
str
ia
Ita
ly
Fin
lan
d
Hu
ng
ary
Po
tug
al
Ire
lan
d
Sp
ain
Gre
ec
e
2010
2011
Real GDP growth
Source: Consensus Forecasts Inc
Future economic growth
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%Net Absorption
Vacancy
Net absorption (rolling six months) and vacancy (% of stock)
Source: CB Richard Ellis
European office absorption and vacancy
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
‘000 Sq M
Source: CB Richard Ellis
Office development – Western Europe
0%
5%
10%
15%
20%
25%
Fra
nk
furt
Am
ste
rda
m
Ma
dri
d
Bru
ss
els
Ha
mb
urg
Be
rlin
Mu
nic
h
Lo
nd
on
Cit
y
Lo
nd
on
We
st
En
d
Pa
ris
Ce
ntr
eW
es
t
Development Pipeline to end 2012 Vacant Q2 2010
Currently vacant office space, plus developments scheduled forcompletion by end 2012As percent of Stock
Source: CB Richard Ellis
Office development pipeline
NB. Markets do not necessarily move along the curve in the same direction or at the same speed.
The rental cycle is intended to display the trend in net effective rents
As at 30th June 2010
L London City
M
Dublin
Barcelona
Berlin
Rome
Lisbon
LyonLGenevaG
Amsterdam
Milan
Brussels
A
Prague
Athens
Dusseldorf
Frankfurt
Paris
Madrid
HamburgStockholm
Copenhagen Oslo
Edinburgh
Munich
London TV
Manchester
DPO
B Birmingham
Vienna
Moscow
Warsaw
Zurich
Helsinki
M
F
P
A
CZ
EV
M
T
Budapest
Bucharest
D
B
R
M
H
H
B
B
B
S
W
M
B
L
Rental Decline Accelerating Rental Decline Slowing Rental Growth Accelerating Rental Growth Slowing
L London West End
Office rent cycle – Q2 2010
Global Research and Consulting
Capital Values and Pricing
-30%
-20%
-10%
0%
10%
20%
30%
Jun-88 Jun-90 Jun-92 Jun-94 Jun-96 Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-08 Jun-10
Yield Impact
Rental Impact
FallingFalling
EU-15 Offices Capital Value Growth, % per annum
Source: CB Richard Ellis
Drivers of capital values
-15 -10 -5 0 5 10 15 20 25 30 35
Industrials
Regional Offices
M25 Offices
CL Offices
Shopping Centres
Retail Warehouses
Shops
All Property
% Change
Monthly Index - Prime Monthly Index - Secondary
Capital value change: June 09 to July 10
Source: CB Richard Ellis
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
Ma
r-0
2J
un
-02
Se
p-0
2D
ec
-02
Ma
r-0
3
Ju
n-0
3S
ep
-03
De
c-0
3M
ar-
04
Ju
n-0
4S
ep
-04
De
c-0
4M
ar-
05
Ju
n-0
5S
ep
-05
De
c-0
5M
ar-
06
Ju
n-0
6S
ep
-06
De
c-0
6M
ar-
07
Ju
n-0
7S
ep
-07
De
c-0
7
Ma
r-0
8J
un
-08
Se
p-0
8D
ec
-08
Ma
r-0
9J
un
-09
Se
p-0
9D
ec
-09
Ma
r-1
0J
un
-10
Se
p-1
0
Retail
Shopping Centres
Offices
Industrial
UK secondary yield spreads
Source: CB Richard Ellis
Prime – secondary yield spread
Global Research and Consulting
Summary
Prime – Secondary dislocation is the key feature of
markets everywhere in Europe
Investors– Investment activity driven by risk averse institutional
style capital
– Lenders have no appetite for secondary either
Occupiers– Weak net absorption
– Uncertain economic outlook
– Any rental growth is due to lack of development activity
Conclusions
Global Research and Consulting
Panel Discussion
Jonathan Hull, Head of EMEA Capital Markets
John Welham, Head of European Retail Investment
Peter Schreppel, Head of International Investment, Germany
Natale Giostra, Head of UK & EMEA Debt Advisory
Source: CB Richard Ellis
Investment market – Germany
UK5%
Spain2%
Netherlands1%
UAE1%
Others4%
Germany87%
2009Total transactions €10.45 billion
H1 2010Total transactions €8.65 billion
Total value of transactions by purchaser nationality
Netherlands16%
UK8%
South Korea8%
USA7%
Others5%
Germany56%
Global Research and Consulting
Panel Discussion
Jonathan Hull, Head of EMEA Capital Markets
John Welham, Head of European Retail Investment
Peter Schreppel, Head of International Investment, Germany
Natale Giostra, Head of UK & EMEA Debt Advisory
