Global Capital Flows Petra Blazkova, Senior Director, APAC Analytics PFA ANNUAL CONFERENCE, 1 ST MAY 2018
TOPICS Global Capital Flows Property Pricing Alternative Sectors Australia in a Wider Context 2
Q1'08 Q1'09 Q1'10 Q1'11 Q1'12 Q1'13 Q1'14 Q1'15 Q1'16 Q1'17 Q1'18 $b AS A REGION, ASIA PACIFIC STANDS OUT Global Investments: 12-mth Rolling Totals 1,200 1,000 800 600 400 200 35% 30% 25% 20% 15% 10% 5% APAC Share of Global (12-mth rolling average) Asia-Pacific $164.4b 11% EMEA $330.1 +8% Americas $424.8b -6% 0 0% Global $918.6b 4% AsiaPac EMEA Americas APAC Share of Global Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. Updated on 28 Apr 2018 3
HONG KONG LEAPS, LONDON FALLS 2016 2017 Q1'18 Market Sales Volume ($m) YOY 1 1 1 NYC Metro 13 7 2 Hong Kong 2 2 3 LA Metro 8 9 4 Tokyo 4 3 5 London Metro 6 6 6 DC Metro 3 5 7 SF Metro 9 13 8 Chicago 18 24 9 Seoul 10 10 10 Atlanta 7 8 11 Dallas 15 21 12 Seattle 19 25 13 Denver 22 18 14 Houston 21 26 15 Phoenix 5 4 16 Paris 28 30 17 Munich 35 28 18 Toronto 23 17 19 Rhine-Ruhr 14 14 20 Boston Metro 11 19 21 Miami/So Fla 33 31 22 Philly Metro 65 71 23 Brussels 17 11 24 Amsterdam/Randstad 24 34 25 Austin 50 54 26 Raleigh/Durham 20 15 27 Berlin-Brandenburg 29 22 28 Frankfurt/Rhine-Main 25 16 29 Madrid 32 27 30 Singapore 2,648 2,551 2,545 2,518 2,452 2,393 1,987 1,926 1,839 1,838 1,693 1,662 1,606 1,432 1,308 1,291 1,229 1,127 1,122 3,455 3,355 3,332 3,304 4,809 6,659 6,654 6,273 6,238 7,677 13,569-61% -57% -7% -14% -30% -31% -34% -47% -50% -10% -14% -19% -29% -4% 31% 90% 38% 30% 18% 84% 19% 31% 46% 18% 62% 8% 99% 24% 42% 140% Note: Office, Retail, Industrial, Apartment, Hotel, Seniors Housing, valued at $10m or greater are included. Development sites excluded. Updated on 26.04.2018 4
IN THE REGION, AUSTRALIA RANKS THIRD NOW Country Investment Volume; Q1 18* Q2'17 Q3'17 Q4'17 Q1'18 YOY chng (12-mth Rolling Total) China Japan 2% 0% Australia Hong Kong 83% 15% South Korea 5% Singapore 16% India 17% APAC - Other 0 10 20 30 40 50 US$ bn Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. * Based on 12-months rolling totals Updated on 26 April 2018 5
INDUSTRIAL CONSISTENTLY UP Global Transactional Volumes by Sector 6
VOLUME INCREASES IN GLOBAL TRADES What is moving around the world? People Data Goods Services Finance 2000 2015 1.3X Increase 7X Increase 10X Increase 3X Increase 1.5X Increase Real Estate 2000 2017 US$8bn US$277bn 34X Increase Source: Real Capital Analytics/McKinsey Global Institute 7
CROSS-BORDER FLOWS Global Cross-Border Investments: Percentage Shares 50% Global Australia 40% 30% 20% 10% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 8
DESTINATIONS OF CROSS-BORDER CAPITAL; 2009-2017 Cross-Border Globally US$ bn 200 180 Cross-Border in Asia Pacific 30 US$ bn 160 25 140 120 100 20 15 Flows from HK 80 Flows from CHN 60 10 40 5 20 0 Americas EMEA APAC 0 Japan China Australia Hong Kong Singapore S Korea Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. Updated on 27 Apr 2018 9
US REMAINS THE TOP EXPORTER 10
CAPITAL FLOWS IN AND OUT OF ASIA PACIFIC Capital Exported From Asia Pacific Capital Imported Into Asia Pacific 17 11 24 25 33 45 50 76 74 89 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 US$b 38 16 4 10 12 12 14 23 23 24 17 Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites included. Domesitc and Regional deals excluded Updated on 28 Feb 2018 11
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 CHINA, HK AND SINGAPORE DOMINATED RECENTLY KEY SOURCES OF CROSS-BORDER ASIAN CAPITAL, 2007-17 China Singapore Hong Kong South Korea Japan APAC - Other 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Note: Income producing property deals valued at $10m or greater are included. Domestic and continental (cross-border Asian) deals excluded. Dev site deals excluded 12
CHINA CAPITAL CONTROL CHINESE CROSS-BORDER CAPITAL FLOWS CHINESE SELLERS SINCE JAN 17 TO NOW US$b 45 HNA Group 40 State-Owned Enterprises CIC 35 Dalian Wanda Group 30 Bright Ruby Resources 25 CITIC Group 20 Wanxiang Grp 15 LeEco 10 5 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Fosun Int'l Ltd Ridong Group Bank of China Americas EMEA AsiaPac 0 1 2 3 $b Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites included. Domesitc deals excluded Updated on 28 Apr 2018 13
IS CHASING CROSS-BORDER CAPITAL A GOOD THING? RCA COMMERCIAL PROPERTY PRICE INDICES ONE YEAR CHANGE Price YOY Change Volume YOY Change 14
GLOBAL GROWTH IN PROPERTY PRICES RCA COMMERCIAL PROPERTY PRICE INDICES (CPPI) Index, Dec 2006 = 100 Hong Kong 200 175 150 125 Singapore Sydney Seoul London Global Composite New York Los Angeles 100 75 Tokyo Chicago Washington DC Amsterdam 50 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 15
AUSTRALIA - STRONG OFFICE & RETAIL PRICE GROWTH RCA Commercial Property Price Indices (CPPI) Australia Office Australia Retail Australia Industrial Sydney Australia Logistics 200 180 160 140 Logistics 120 100 80 Industrial 60 40 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 16
TRANSACTION YIELDS REFLECT INVESTOR DEMAND Office Yields APAC & London Tokyo HK London Sydney Office Yields 11.0% 8.0% 7.0% Seoul Singapore Sydney 10.0% 9.0% 8.0% 6.0% 7.0% 5.0% 6.0% 5.0% 4.0% 4.0% Uber-Prime Prime Secondary 3.0% '11 '12 '13 '14 '15 '16 '17 3.0% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 17
TRANSACTION YIELDS REFLECT INVESTORS DEMAND Australia: Average Transaction Office & Retail Yield 9.0% Asian Buyer Domestic (AUS) Buyer 8.0% 7.0% 6.0% 5.0% '11 '12 '13 '14 '15 '16 '17 '18 18
DESPITE COMPRESSION SPREADS STILL HIGH In most markets remain ahead of long-term averages * Cap Rate = 12-mth average transactional Office, Retail, Industrial 19
INVESTORS STILL UNDER-ALLOCATED, ESP. ASIAN Allocation Target Europe Americas APAC Global 0% 2% 4% 6% 8% 10% 12% Source: INREV Investor Intentions Survey 2018 20
INVESTORS PUSH FOR ALTERNATIVES Investment Volumes Globally 250 Multi-Fam 150 200 150 100 Student housing Seniors Housing & Care Medical office Data center 100 50 Q1 18 (12-mth Rolling Total) YOY% Multi-Fam 6% Student Hsng 14% SHC -6% Medical Office 26% Data Centers 52% 50 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 0 21
ALTERNATIVE VOLUMES IN AUS US$b Data center Medical office Seniors Housing & Care Student housing Multi-Family 2.5 2.0 1.5 1.0 0.5 0.0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 22
INVESTORS EXPLORING ALTERNATIVES Transaction Yields, Last 12 Months 23
ACTIVITY AND PRICING OF THE MULTI-FAMILY MARKET RCA CPPI YOY Change: U.S. 30% Office Retail Industrial Apartment Hotel 20% 10% 0% -10% -20% -30% -40% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '13 '14 '15 '16 '17 '18 24
INVESTORS TURN TO FORWARD SALES Investment Volume of Forward Sales US$b 20 15 10 5 % Share of Total Volume 15% 10% 5% APAC - Other India Malaysia South Korea Singapore Australia Hong Kong 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 0% China Note: Office, Retail, Industrial, Apartment, Hotel valued at $10m or greater are included. Development sites excluded. Updated on 28 Feb 2018 25
ALTERNATIVES: NOT ONLY ASSETS BUT ALSO ROUTES Global Investments; 12-moths Rolling Totals US$b 180 160 140 120 100 80 60 40 20 Entity Deals Joint Ventures 0 Q1'09 Q1'10 Q1'11 Q1'12 Q1'13 Q1'14 Q1'15 Q1'16 Q1'17 Q1'18 26
WHAT DOES IT ALL MEAN? MORE OF: More JVs and M&As More niche property investment More cross-border New sources of capital LESS OF: Economic growth Political certainty Appetite for risk Is the money going to move elsewhere or will yields fall further? 27
Thank You www.rcanalytics.com Petra Blazkova Senior Director, Analytics, Asia Pacific pblazkova@rcanalytics.com info@rcanalytics.com