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

Property EU: H2 2017 Outlook London, June 15 th 2017 Damian Harrington, MRICS | Director, Head of EMEA Research

Content: ▪ The global context ▪ Cyclical and structural impacts ▪ Europe: country & city outlook ▪ Politics and cereal metaphors 2

Investment cycle: volumes by global region (US$) $800 Billions $700 $600 $500 $400 $300 $200 $100 $- Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 AsiaPac EMEA Americas Source: RCA/Colliers 3

Investment cycle: ‘trading yields’ by global region 9% 8% 7% 6% 5% 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 Source: RCA/Colliers 4

Long-term trends: bond yields and weight of capital Global institutional funds Government Bond Yields (10yr) under management 18% US UK 60 16% DEU FR 50 14% 12% 40 10% $ trillion 30 8% 6% 20 4% 10 2% € € € € € $ $ $ $ $ 0 0% 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2012 2013 2014 2015 2016 Source: OECD, ECB, FT Source: IPE 5

Long-term trends - demographics Population Change 2015 to 2030 25% 20% 15% 10% 5% 0% Working Age Popn Total Popn -5% -10% -15% Source: United Nations, 2017 6

Low interest rates: are low yields sustainable? Globalisation & Technology = Yes, they are *r = 7

Cyclical …… or structural? Normal mid-cycle slowdown giving way to upturns in Europe Composite PMI Index¹ 60 UK 55 Eurozone 50 US 45 40 apr-15 jul-15 okt-15 jan-16 apr-16 jul-16 okt-16 jan-17 apr-17 ¹ UK weighted average Source: Markit 8

Are occupier market conditions tightening? Office Markets I&L Markets Retail Markets Tenant Landlord Neutral Source: Colliers, 2017 9

Offices Some interesting evidence… Activity-based working A.I. Regulation/Legislation 10

Industrial & Logistics ‘Green’ City Global Retailer/ Freight Freight Shipping Consumer Forwarding Kuehne+Nagel, Sinotrans Limited, DHL, DB Schenker, Pantos Logistics Project Dragon Boat 11

The Experience (& Convenience) Economy: Retail R.I.P? Growth/ Profit Scale 3,500 12

The Experience Economy: Leisure/Hotels & Residential 20,000 / day Winners & Losers?  Up-scale/luxury hotels  Budget, experience- driven providers 13

What to buy? Dev Site Dev Site Hotel Hotel Industrial Industrial Residential Residential Retail Retail Office Office 2007 2016 14 Source: RCA/Colliers

Real Estate Investment in EMEA (€ Billion): Last 10yrs In 2016, Germany led UK for first time Country 2013 2014 2015 2016 10yr Avg €239bn in 2016 UK 60.9 73.8 99.6 52.8 54.9 (-27% y-o-y) Germany 46.2 51.1 72.1 52.9 42.1 5.3 France 20.3 26.4 35.7 26.2 22.4 4.8 14.9 Sweden 11.5 14.5 14.7 14.9 11.8 2.8 Spain 4.0 10.8 11.5 15.5 8.7 Netherlands 5.7 9.4 13.6 15.4 8.6 4.7 Russia 9.9 5.0 5.1 2.8 6.6 52.8 15.4 5.2 6.2 11.4 9.6 6.2 Italy 5.1 5.2 Norway 3.6 4.1 10.1 4.8 4.4 52.9 2.5 2 Switzerland 3.7 4.8 6.6 5.5 4.2 Poland 4.2 3.9 5.1 5.2 3.6 3.2 26.2 5.5 Denmark 2.1 2.5 5.2 4.7 3.0 9.6 Finland 1.5 3.2 4.2 5.3 2.9 Austria 2.8 3.9 5.1 3.2 2.9 15.5 Belgium 2.2 2.9 3.5 2.5 2.4 2.2 4.8 4.6 5.2 2.2 Ireland South Africa 2.0 2.0 6.8 1.8 2.2 Czech Rep 1.4 2.1 2.7 3.3 1.9 Source: RCA – deals over US$10 million only. 15

16 Where to invest?: ‘CRE growth + Safe- haven’ factors Country Score 100 120 140 20 40 60 80 0 Germany United Kingdom France Netherlands Sweden Norway Switzerland Finland Denmark Spain Austria Belgium Ireland Italy Czech Republic Poland Estonia Slovakia Turkey Lithuania Source: Colliers/OECD/OxfordEconomics Latvia Portugal Romania Croatia Bulgaria Hungary Greece Russia Serbia Ukraine

Q1 2017 investment volumes: by country 18 Euro Billions 16 14 12 10 8 6 4 2 0 Source: RCA * 5 million Euro + only 17

‘Latent Skilled Talent’: office requirement (mill. sqm) English language: 20 th , 17 th 6 th 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 18 Source: Colliers/OECD/OxfordEconomics

Where should you be located? 30 30 40 50 30 20 30 40 30 100 100 City Output Future Skills Affordability Risk & Capacity & Cost (100) (100) (100) (200) 19

Where to invest?: Cities of Influence 360 340 320 300 280 260 240 220 200 London Paris Manchester Stockholm Dublin Munich Vienna Amsterdam Madrid Prague Frankfurt Zurich Berlin Hamburg Warsaw Barcelona Lisbon Brussels Budapest Milan 20

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 ‘Hundreds’ Goldman Sachs Frankfurt HSBC 1,000 Paris Hiscox ? Paris JP Morgan 300 Dublin/ Frankfurt/Lux Lloyds <100 Brussels Morgan Stanley ? Frankfurt Nomura Bank ? Frankfurt ‘low tens’ Standard Chartered Frankfurt 21 UBS 600 Frankfurt

Brexit relocation: the broader skill base 140 140,0 100,000 jobs 120 120,0 will absorb the entire latent Latent Capacity (000s) 100 100,0 talent pool in several cities 80 80,0 Skilled Workforce Finance Workforce 60 60,0 40 40,0 20 20,0 0 0,0 22

UK election….. and ‘Brexit’ course of action • EU Referendum (Jun 16) UK/EU Structural Leave Remain • Leave 52% Brinkmanship • Remain 48% UK position weakened or • YouGov Poll (May 17) strengthened by the election? • Hard Leavers (45%) • Re-Leavers (23%) Will May survive • Remain (22%) • Don’t know (10%) Conclusion: over two-thirds support Brexit 23

Global Geo- politics…….are a changing 24

European political ‘risk’ highlights 2017 Key Dates Events to Watch 8 th Jun UK General Election – Hung parliament? Scottish/Irish mayhem? 15 th Jun EU Eurogroup meets to discuss Greece bailout. German haircuts? 22 nd Jun European Council Summit 7 th Jul G20 Meeting in Germany – mass demonstrations 17 th Jul Greek € 7bn payment due (subject to IMF-EU-ECB agreement) 24 th Sep German Elections (Italian snap election???) 2 - 5 th Oct Trump state visit to UK 19 th Oct European Council Summit – Brexit negotiation response? Oct Another UK General Election?; Spanish referendum? 25

Global CRE Markets in Summary 1. Geo-political (and economic) uncertainty tops the agenda Long-term trends strong, and counter-balance ‘end -of- cycle’ challenges 2. Stability of real-estate attractive to investors, despite low yields; 3. 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 26

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