PROPERTY EU EUROPEAN LOGISTICS INVESTMENT BRIEFING

RICHARD HOLBERTON, SENIOR DIRECTOR, EMEA RESEARCH, CBRE

FEBRUARY 19TH 2015

– Economy

– Market Activity

– Forecasts

– Issues

AGENDA

ECONOMY

2014

Some Alarms…

…and Some Deja Vu

Eurostat Economic Sentiment Indicator

Improving Economic Outlook

-10 -5 0 5 10 15 20 25

Finland

Austria

France

Italy

Denmark

Belgium

Romania

Poland

Greece

Netherlands

Spain

EU Average

Portugal

Germany

Czech Republic

Sweden

Ireland

UK

Hungary

difference from the long-run average

Oct-Dec 2014

Oct-Dec 2013

Eurostat Economic Sentiment Indicator

Periphery Improving Against Core Eurozone

Ez Core (includes Italy)

Ez Periphery (includes Spain)

Northern

-40

-30

-20

-10

0

10

20

2006 2007 2008 2009 2010 2011 2012 2013 2014

Eurozone to Lag Behind the Rest

Annual average GDP growth 2015-19

Source: Oxford Economics

0 1 2 3

Russia

Eurozone

Nordics

UK

Central Europe

0 1 2 3

Italy

France

Netherlands

Germany

Spain

Ireland

10-year Government Bond Yields

Source: Macrobond

0

1

2

3

4

5

6

7

8

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Germany

Italy

UK

MARKET ACTIVITY

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010 2011 2012 2013 2014

WAREHOUSE/ LOGISTICS TAKE-UP, SELECTED Warehouse/Logistics Take-up

Selected Locations, (Y on Y % Change)

Where ?: France; Netherlands; Italy;

Poland (& other CEE)

Who?: National and international

retailers; food manufacturing;

pharma; 3PLs and parcel services.

Focus on prime

11 CBRE | JANUARY 2014

The Demand “Dumbbell”

XXL warehouse platforms in

strategic locations

Urban logistics & parcel

delivery centres

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Dec-8

8

Dec-9

0

Dec-9

2

Dec-9

4

Dec-9

6

Dec-9

8

Dec-0

0

Dec-0

2

Dec-0

4

Dec-0

6

Dec-0

8

Dec-1

0

Dec-1

2

Dec-1

4

Retail Index Industrial Index Office Index All Property Index

EMEA Prime Rent Index

Y-O-Y Change (%)

Source: CBRE Research

0

50

100

150

200

250

300

0

10

20

30

40

50

60

70

80

90

Q4 2

006

Q2 2

007

Q4 2

007

Q2 2

008

Q4 2

008

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

CREInvestment

12 MonthRollingTotal

Q4 investment turnover close to record level

Commercial Property Investment In Europe

Billion € Billion €

Source: CBRE Research

Industrial & Logistics Investment, Europe, 2003-14

0

5

10

15

20

252003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

France Germany UK Benelux Nordics Southern Europe CEE Other

Billion €

Source: CBRE Research

15

Property Investment In Europe By Sector

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Q4 2

006

Q2 2

007

Q4 2

007

Q2 2

008

Q4 2

008

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Office

Retail

Industrial

Source: CBRE Research

Share of Investment Turnover (%)

FORECASTS

Shoulder To Shoulder ?

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Mar-

91

Feb-9

2

Jan-9

3

Dec-9

3

Nov-9

4

Oct-

95

Sep-9

6

Aug-9

7

Jul-98

Jun-9

9

May-0

0

Apr-

01

Mar-

02

Feb-0

3

Jan-0

4

Dec-0

4

Nov-0

5

Oct-

06

Sep-0

7

Aug-0

8

Jul-09

Jun-1

0

May-1

1

Apr-

12

Mar-

13

Feb-1

4

Jan-1

5

Dec-1

5

Nov-1

6

Oct-

17

Sep-1

8

Retail Industrial Office

CBRE EMEA Prime Yield Index

Weighted Average Prime Yield (%)

Source: CBRE Research

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Mar-

91

Feb-9

2

Jan-9

3

Dec-9

3

Nov-9

4

Oct-

95

Sep-9

6

Aug-9

7

Jul-98

Jun-9

9

May-0

0

Apr-

01

Mar-

02

Feb-0

3

Jan-0

4

Dec-0

4

Nov-0

5

Oct-

06

Sep-0

7

Aug-0

8

Jul-09

Jun-1

0

May-1

1

Apr-

12

Mar-

13

Feb-1

4

Jan-1

5

Dec-1

5

Nov-1

6

Oct-

17

Sep-1

8

350 bps

200 bps

Present yield relative to high and low of current cycle (%)

Prime Warehouse/Logistics Yields

Source: CBRE Research

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Lo

nd

on

Fra

nkfu

rt

Ha

mb

urg

Mu

nic

h

Sto

ckh

olm

Am

ste

rda

m

Ro

tte

rda

m

Ma

nch

este

r

Bru

sse

ls

Pa

ris

Du

blin

Wa

rsa

w

Pra

gu

e

Ba

rce

lon

a

Ma

dri

d

Mila

n

Lis

bo

n

Bu

da

pe

st

Current yield Cyclical low Cyclical peak

Industrial Yields Outlook

Source: CBRE

-1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6

Dublin

Budapest

Barcelona

Moscow

Madrid

Vienna

Milan

Helsinki

Prague

Manchester

Hamburg

Bratislava

Frankfurt

Warsaw

Berlin

Brussels

Paris

Oslo

Amsterdam

Munich

London

Yield Shift (BPs) 2015-19

Industrial Rental Growth Outlook

Source: CBRE

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Brussels

Barcelona

Hamburg

Bratislava

Budapest

Berlin

Stockholm

Amsterdam

Munich

Paris

Warsaw

Milan

Madrid

Frankfurt

Manchester

Prague

Moscow

London

Dublin

Oslo

%pa

Rental Growth % p.a. (2015-19)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

4.0

2.0

0.0

2.0

4.0

6.0

8.0

10.0

London

Oslo

Mancheste

r

Wars

aw

Sto

ckholm

Dublin

Berlin

Fra

nkfu

rt

Munic

h

Am

ste

rdam

Bru

ssels

Barc

elo

na

Paris

Mila

n

Madrid

Pra

gue

Prime Yield 10-year Government Bond

Spread ERV Growth % p.a. (rhs)

Yield Gaps And Rental Growth

Source: CBRE Research, Macrobond

Prime industrial yield relative to 10-year government bond(%) Q4 2014

Industrial Returns Outlook

Source: CBRE

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0

Oslo

London

Munich

Amsterdam

Berlin

Brussels

Hamburg

Paris

Frankfurt

Warsaw

Bratislava

Manchester

Milan

Prague

Madrid

Barcelona

Budapest

Dublin

Moscow

%pa

Returns % p.a. (2015-19)

• Differences from 2007…..

� Prime property yields comfortably above long-term interest rates

� Investment being primarily financed by equity rather than debt

� And economies and leasing markets (mostly) improving

• ……Doesn’t mean that there aren’t risks

� Upward yield corrections if occupier market expectations are dented by

financial / political events (e.g., Grexit)

� Some protection for industrial & logistics as its not a “growth play”, but

exchange rates (actual and anticipated) may be more of an issue

• Pricing : cheap or expensive: ?

• Where next for capital: secondary assets, niche markets….?

Issues

PROPERTY EU EUROPEAN LOGISTICS INVESTMENT BRIEFING

RICHARD HOLBERTON, SENIOR DIRECTOR, EMEA RESEARCH, CBRE

FEBRUARY 19TH 2015