Property EU: H2 2017 Outlook London, June 15 th 2017 Damian - - PowerPoint PPT Presentation

Property EU: H2 2017 Outlook

London, June 15th 2017

Damian Harrington, MRICS | Director, Head of EMEA Research

Content:

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▪ The global context ▪ Cyclical and structural impacts ▪ Europe: country & city outlook ▪ Politics and cereal metaphors

Investment cycle: volumes by global region (US$)

3 Source: RCA/Colliers

$- $100 $200 $300 $400 $500 $600 $700 $800

Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17

Billions

AsiaPac EMEA Americas

Investment cycle: ‘trading yields’ by global region

4 Source: RCA/Colliers

5% 6% 7% 8% 9%

Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17

AsiaPac EMEA Americas

Long-term trends: bond yields and weight of capital

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€ € € € € $ $ $ $ $ 10 20 30 40 50 60 2012 2013 2014 2015 2016

$ trillion

Global institutional funds under management

Source: IPE

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 US UK DEU FR

Government Bond Yields (10yr)

Source: OECD, ECB, FT

Long-term trends - demographics

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Source: United Nations, 2017

• 15%
• 10%
• 5%

0% 5% 10% 15% 20% 25%

Population Change 2015 to 2030

Working Age Popn Total Popn

Low interest rates: are low yields sustainable?

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*r =

= Yes, they are

Globalisation & Technology

Cyclical …… or structural?

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Normal mid-cycle slowdown giving way to upturns in Europe

¹ UK weighted average Source: Markit

Eurozone

US UK

40 45 50 55 60 apr-15 jul-15

• kt-15

jan-16 apr-16 jul-16

• kt-16

jan-17 apr-17

Composite PMI Index¹

Are occupier market conditions tightening?

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Tenant Landlord Neutral

Source: Colliers, 2017

Office Markets Retail Markets I&L Markets

Offices

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Activity-based working A.I. Regulation/Legislation Some interesting evidence…

Industrial & Logistics

Global Shipping Freight Forwarding Retailer/ Consumer

Kuehne+Nagel, Sinotrans Limited, DHL, DB Schenker, Pantos Logistics

Project Dragon Boat

‘Green’ City Freight

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The Experience (& Convenience) Economy: Retail

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Growth/ Scale Profit

R.I.P?

3,500

The Experience Economy: Leisure/Hotels & Residential

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

Up-scale/luxury hotels



Budget, experience- driven providers

Winners & Losers?

20,000 / day

What to buy?

14 Source: RCA/Colliers

Office Office Retail Retail Residential Residential Industrial Industrial Hotel Hotel Dev Site Dev Site

2007 2016

Real Estate Investment in EMEA (€ Billion): Last 10yrs

In 2016, Germany led UK for first time

Source: RCA – deals over US$10 million only.

Country 2013 2014 2015 2016 10yr Avg

UK 60.9 73.8 99.6 52.8 54.9 Germany 46.2 51.1 72.1 52.9 42.1 France 20.3 26.4 35.7 26.2 22.4 Sweden 11.5 14.5 14.7 14.9 11.8 Spain 4.0 10.8 11.5 15.5 8.7 Netherlands 5.7 9.4 13.6 15.4 8.6 Russia 9.9 5.0 5.1 2.8 6.6 Italy 5.2 6.2 11.4 9.6 6.2 Norway 3.6 4.1 10.1 4.8 4.4 Switzerland 3.7 4.8 6.6 5.5 4.2 Poland 4.2 3.9 5.1 5.2 3.6 Denmark 2.1 2.5 5.2 4.7 3.0 Finland 1.5 3.2 4.2 5.3 2.9 Austria 2.8 3.9 5.1 3.2 2.9 Belgium 2.2 2.9 3.5 2.5 2.4 Ireland 2.2 4.8 4.6 5.2 2.2 South Africa 2.0 2.0 6.8 1.8 2.2 Czech Rep 1.4 2.1 2.7 3.3 1.9 52.8 52.9 26.2 15.5 14.9 15.4 5.2 2 5.1 4.8 2.8 3.2 €239bn in 2016 (-27% y-o-y) 9.6 5.3 5.5 4.7 2.5

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Where to invest?: ‘CRE growth + Safe-haven’ factors

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20 40 60 80 100 120 140

Germany United Kingdom France Netherlands Sweden Norway Switzerland Finland Denmark Spain Austria Belgium Ireland Italy Czech Republic Poland Estonia Slovakia Turkey Lithuania Latvia Portugal Romania Croatia Bulgaria Hungary Greece Russia Serbia Ukraine

Country Score

Source: Colliers/OECD/OxfordEconomics

Q1 2017 investment volumes: by country

17 Source: RCA * 5 million Euro + only

2 4 6 8 10 12 14 16 18

Euro Billions

6,0 3,9 3,3 3,0 1,8 1,7 1,1 1,1 0,9 0,9 0,8 0,7 0,7 0,5 0,4 0,4 0,4 0,3 0,2 0,2

‘Latent Skilled Talent’: office requirement (mill. sqm)

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English language: 20th, 17th 6th

Source: Colliers/OECD/OxfordEconomics

Where should you be located?

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30 30 40 50 30 20 30 40 30 100 100 City Output (100) Future Skills & Capacity (100) Affordability & Cost (100) Risk (200)

Where to invest?: Cities of Influence

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200 220 240 260 280 300 320 340 360 London Paris Manchester Stockholm Dublin Munich Vienna Amsterdam Madrid Prague Frankfurt Zurich Berlin Hamburg Warsaw Barcelona Lisbon Brussels Budapest Milan

Brexit relocation: what do we know? <10,000 jobs

Who What Where AIG ? Luxembourg Bank of China ? Dublin Bank of America ? Dublin Barclays ? Dublin Citi Group 200 Frankfurt Credit Suisse ? Dublin Daiwa ? Dublin European Banking Authority 159 Frankfurt Goldman Sachs ‘Hundreds’ Frankfurt HSBC 1,000 Paris Hiscox ? Paris JP Morgan 300 Dublin/ Frankfurt/Lux Lloyds <100 Brussels Morgan Stanley ? Frankfurt Nomura Bank ? Frankfurt Standard Chartered ‘low tens’ Frankfurt UBS 600 Frankfurt

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Brexit relocation: the broader skill base

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0,0 20,0 40,0 60,0 80,0 100,0 120,0 140,0 20 40 60 80 100 120 140

Latent Capacity (000s)

Skilled Workforce Finance Workforce

100,000 jobs will absorb the entire latent talent pool in several cities

UK election….. and ‘Brexit’ course of action

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• EU Referendum (Jun 16)
• Leave 52%
• Remain 48%
• YouGov Poll (May 17)
• Hard Leavers (45%)
• Re-Leavers (23%)
• Remain (22%)
• Don’t know (10%)

Leave Remain

UK/EU Structural Brinkmanship UK position weakened or strengthened by the election? Will May survive Conclusion: over two-thirds support Brexit

Global Geo-politics…….are a changing

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European political ‘risk’ highlights 2017

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Key Dates Events to Watch 8th Jun UK General Election – Hung parliament? Scottish/Irish mayhem? 15th Jun EU Eurogroup meets to discuss Greece bailout. German haircuts? 22nd Jun European Council Summit 7th Jul G20 Meeting in Germany – mass demonstrations 17th Jul Greek €7bn payment due (subject to IMF-EU-ECB agreement) 24th Sep German Elections (Italian snap election???) 2 - 5th Oct Trump state visit to UK 19th Oct European Council Summit – Brexit negotiation response? Oct Another UK General Election?; Spanish referendum?

Global CRE Markets in Summary

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• 1. Geo-political (and economic) uncertainty tops the agenda

2. Long-term trends strong, and counter-balance ‘end-of-cycle’ challenges 3. Stability of real-estate attractive to investors, despite low yields;

• 4. Disruptive/defensive qualities of I&L and residential most attractive
• 5. Tier 1 and key cities to dominate, but ‘rank and file’ changes expected

Damian Harrington, MRICS

Director, Head of EMEA Research Mobile +358 400 907972 damian.harrington@colliers.com