The global economy and real estate capital flows Miles Gibson Head of UK Research
12 End of cycle 10 fears are 8 growing 6 U.S. U-3 Unemployment (%, Monthly, SA) 4 3y 8m 7y 7m 9y 6m 11y 6y 4m 10y+ 2 0 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: U.S. Bureau of Labor Statistics & CBRE Research, Q2 2018.
Brexit: There will be a ‘Canada plus’ Financial Migration policy dea eal l (eventually) or ‘EEA minus’ services access low-skill workers CBRE’S on ‘divorce’ and trade will be tough most affected House View ‘transition’ agreement to secure
USA Euro Area UK China USA 10 year bond 9.0 FORECAST 8.0 An economic 7.0 soft patch 6.0 ahead 5.0 4.0 GDP growth, 3.0 selected countries, 2.0 2012 - 2023, % 1.0 0.0 -1.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: CBRE Research, October 2018
1.2 FORECAST UK interest rates 1.0 up… eventually, 0.8 and slightly 0.6 UK base rate 0.4 0.2 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: CBRE Research
27 26 Global savings 26% increasing 25 since 2000 24 23% 24% 23% Gross savings 23 as % of global GDP 22 21 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Oxford Economics/Haver Analytics, Macrobond, CBRE Econometric Advisors, April 2018.
80 70 Investment 60 holding up 50 40 UK real estate 30 investment volumes, 20 2004 - 2018, £bn 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f Source: CBRE Research, October 2018
Overseas Investors UK Investors Overseas share (RHS) 80 60% 70 Globalisation 50% Investment Volumes (£bn) 60 works for real 40% 50 estate too 40 30% 30 Overseas and 20% 20 domestic real 10% estate investment 10 volumes, £bn and 0 0% % overseas share, 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2004 - 2017 Source: PropertyData
2004 - 2018 Q3 investment volumes, £bn, UK residential real estate a beneficiary property has been And residential Investment Volumes (£bn) 0.5 1.5 2.5 3.5 0 1 2 3 2004 Q4 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 Source: PropertyData, CBRE 2018 Q1 2018 Q2 2018 Q3
Other Industrial Retail Office 100% 90% 80% The rise of 70% alternatives 60% 50% UK property investment 40% volumes, by sector, 30% 2008 - 2017 20% 10% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CBRE Research, April 2018
Already invested and actively pursuing further exposure Not invested, but actively looking for exposure Already invested, but not looking for further exposure Automotive/Car Parks Most investors Data Centre have alternatives… Leisure/Entertainment and want more Healthcare UK property investment Multi-Family Residential volumes, by sector, 2008 - 2017, % Retirement Living Student Living 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: CBRE Investor Intentions Survey, March 2018
Indexed Lower vacancy Granular Tenant Alternatives: returns rates underlying default rate More traditional Most leases demand than ‘traditional signed for 20+ RPI more Due to demand Can be lower sectors’? years common in such and supply Individuals, not than main-stream leases mismatch companies sectors
Interest rates Global Brexit Elevated capital Alternatives have a fair economic drag flows are looking attractive Conclusions way to rise downturn substantial and structural Retarding UK’s But not immune Led by Likely, but should position in the With real estate from the cycle the US be moderate economic cycle benefiting
What does this mean for UK BTR? Helen Gray Head of Build To Rent Consultancy
Economic backdrop Investor Supply and Occupational Strong economic will continue to demand demand demand fundamentals support the housing market Source: RICS, Land Registry
4.50% 4.00% 3.50% UK 3.00% LONDON Rental 2.50% forecasts 2.00% 1.50% 2018 - 2022 1.00% 0.50% 0.00% 2019 2020 2021 2022 2023 Source:
Average scheme size 332 350 300 64,700 248 250 BTR Rest of UK No. of units 200 supply 150 125 Total UK BTR: 131,900 units 100 50 67,100 0 London Complete Construction Planning Source: BPF
Price Greater Suburban Flexibility point differentiation BTR Product Source: RICS, Land Registry
£700m 2018 under offer £3bn £2.4bn -plus £2.1bn Total 2017 2018 yr-to-date investment volumes £3,000 Residential Investment Volumes (£m) £2,500 investment £2,000 volumes £1,500 £1,000 £500 £0 2015 2016 2017 2018 ytd Source: CBRE * Excl. Wembley Park in 2008 ‘On the Market’. Rumoured asking price >£3bn.
£103bn (US$145bn) £91bn US multi-family (US$128bn) US offices £67.9bn Market All UK property Capacity £27.2bn All UK offices £4.6bn £2.4bn Purpose -built Total residential student investment accommodation volume
£32bn
Interested capital Transactions Middle East Asia/Pacific 9% 16% UK 25% Canada 13% Europe 8% UK 46% Middle East 6% Canada US 14% US 32% 31%
Transaction type 2018 2015 2016 2017 YTD Standing investment Forward funding Forward commitment Land Source: CBRE
£4.0 Portfolios Single Assets Portfolio - Long Term Average Portfolio - Single Assets £3.5 £3.0 The student £2.5 sector Billions £2.0 Investment £1.5 volumes £1.0 £0.5 £0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017
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