CRE investment weakens in Q as investors struggle to find product in prime markets

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1 Europe Capital Markets, Q CRE investment weakens in Q as investors struggle to find product in prime markets -39.3% -16.9% 15.0% -41 bps CBRE recorded total CRE investment transactions of 50.3 billion in Q1 2016, down 16.9% on Q1 2015, but still the third best first quarter on record. The biggest year-on-year increases were seen in Russia, Netherlands and Finland, all with turnover up by more than 1 billion. The UK followed by France and Germany were the markets where market activity was down by the greatest margin compared to Q The industrial sector bucked the trend, with investment up 58% on Q1 last year. Investment fell back in all other sectors, though this was less marked in office than in retail and hotels. Retail investment slowed most significantly, down 40% on Q Cross-border investment remained strong, representing 43% of the market this quarter. As usual London and Paris filled the top two spots in the table of most liquid markets in Europe in Q Copenhagen has moved up the city rankings into third place driven by a high volume of cross-border investment. Large transactions in Moscow and Birmingham propelled these cities into the top ten list. German cities slipped in the rankings, however three cities are still in the top ten markets in Europe, more than any other country. Figure 1: European Investment Turnover ( bn) Quarterly Total(LHS) Rolling 12 Mo.Total(RHS) Q CBRE Research 2016 CBRE Ltd. 1

2 USA Germany Asia UK Middle East France Switzerland Sweden Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q CROSS-BORDER INVESTMENT Figure 2: Cross-border Investment, Europe ( bn) % 32% 41% 36% Cross-border Purchasers Local Purchasers 37% 33% 47% 42% 40% 39% 42% 43% 46% 40% 44% 47% 49% 46% 42% 45% 43% Figure 3: Cross-border Investment, Q1 2016: By Buyer Nationality (%) Purchases Sales Q CBRE Research 2016 CBRE Ltd. 2

3 BUYER TYPE Figure 3: Buyer Mix by Value (%), Q Institutional Fund Property Company (Listed/REIT) Property Company (Other) Collective Vehicles Private Other DEAL SIZE Figure 9: Distribution of Major Transactions (number over 100m) Q Q Q Q United Kingdom Germany France Sweden Denmark Italy Netherlands Finland Spain Belgium Portugal Europe Q CBRE Research 2016 CBRE Ltd. 3

4 London Paris (IDF) Copenhagen Moscow Birmingham Stockholm Munich Hamburg Helsinki Berlin TOP 10 INVESTMENT MARKETS Figure 4: Ten Largest Investment Markets in Europe Turnover Q million Change on Q (%) % of European Market* London 6, Paris (IdF) 2, Copenhagen 1, Moscow 1, Birmingham 1, Stockholm 1, Munich 1, Hamburg Helsinki Berlin * Excluding indivisible multi-city portfolios Figure 5: Source of Investment in Europe s Major Markets; Q % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Domestic Asia North America Other European Middle East Other Q CBRE Research 2016 CBRE Ltd. 4

5 EUROPEAN INDICATIVE PRIME YIELDS, Q Figure 6: Prime Yields (%) Country Market Prime Office Change on Quarter Prime Retail Change on Quarter Prime Industrial Austria Vienna Belgium Brussels Bulgaria Sofia* Change on Quarter Croatia Zagreb* Czech Republic Prague* Denmark Copenhagen Finland Helsinki France Paris Germany Berlin Germany Frankfurt Germany Munich Hungary Budapest* Ireland Dublin Italy Milan Italy Rome Netherlands Amsterdam Netherlands Rotterdam Poland Warsaw* Portugal Lisbon Romania Bucharest* Russian Federation Moscow* Serbia Belgrade* Slovakia Bratislava* Spain Barcelona Spain Madrid Sweden Stockholm Switzerland Zurich Ukraine Kyiv* United Kingdom London 4.00/ United Kingdom Birmingham United Kingdom Edinburgh United Kingdom Manchester Q CBRE Research 2016 CBRE Ltd. 5

6 Q Q Q Q Q Q Q Q Q Q Q Q Q Q YIELDS Figure 7:EMEA Average Prime Yields (12-month yield shift, bps) Shops Offices Industrial Shopping Centre DEBT MARKET Figure 8: Key Lending Terms* end-march 2016 Senior Lending, Top Quality Real Estate and Tenant Market Max Loan** Max LTV Margin*** Germany 350m 75% 100 bps Ireland 150m 70% 200 bps Italy 100m 65% 225 bps Netherlands 500m 85% 115 bps Spain 100m 65% 175 bps UK 250m 80% 135 bps Market Trend *New 5-year loan based on the maximum underwriting capacity of a single lender **Maximum ticket from a single lender ***Margin over EURIBOR/LIBOR Swap Q CBRE Research 2016 CBRE Ltd. 6

7 MARKET ANALYSIS Figure 9: Investment Activity by Country Market Turnover( m) Q Q Change on Quarter(%) Q1 on Q4 Change on Year (%) Q1 on Q1 UK 18,402 25, Germany 8,230 9, France 3,052 4, Sweden 2,938 2, Netherlands 2,344 1, Spain 2,312 3, Finland 1, Denmark 1,780 1, Italy 1,768 1, Belgium 1, Norway 1,072 2, Other Western Europe 2,794 4, Russia 1, Poland Czech Republic Other CEE Europe* 50,269 60, Source: CBRE Research & Property Data, Q Q CBRE Research 2016 CBRE Ltd. 7

8 MARKET ANALYSIS BY COUNTRY Q CBRE Research 2016 CBRE Ltd. 8

9 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Basis Points ATTRACTIVE PRICING OUTSIDE CORE MARKETS Figure 10: European Property Yields: Spread between Markets Spread (rhs) Office prime (lhs) Office secondary (lhs) Figure 11: Pan-Europe IPD Income Returns (year-on-year %) Residential Office Other Industrial Retail 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% Source: CBRE Research & IPD, Q Q CBRE Research 2016 CBRE Ltd. 9

10 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Percent MARKET OUTLOOK Figure 12: Eurostat Economic Sentiment Indicator Croatia Hungary Cyprus Malta Sweden Slovenia Italy Spain Czech Republic Portugal Germany Lithuania United Kingdom EU Bulgaria Luxembourg Euro Area Romania Netherlands Poland Latvia Slovakia France Belgium Denmark Estonia Austria Finland Greece Difference from long-run average Feb-Apr 2016 Feb-Apr 2015 Figure 13: Trends in Prime Yields, CBRE Index UK Key Markets EMEA Eurozone Q CBRE Research 2016 CBRE Ltd. 10

11 CONTACTS CBRE OFFICES EMEA CAPITAL MARKETS CONTACTS Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.