30 March 2015

Research & Strategy
European Real Estate Weekly Monitoring Page
Shan Shan Qi: +44 207 016 4853
Email: [email protected]
2015/03/30
www.aeweurope.com
CAPITAL MARKET INDICATORS
Euro falls as Goldman Sachs bear call underscores record shorts: The euro fell,
snapping a two-week rally against the dollar, as Greece’s funding concerns and the
ECB’s aggressive monetary easing contrasted with the Federal Reserve’s path toward
higher interest rates. Goldman Sachs predicted the euro weakness will continue, while
speculators placed record bets on further declines as Greece strives to persuade
creditors to accept proposed reforms and release further aid.
Yuan rises as PBOC’s Zhou signals room for easing amid slowdown: The yuan
rose the most in almost a week amid speculation Chinese authorities will step up
efforts to spur expansion in Asia’s largest economy. The nation’s growth rate has
tumbled a bit too much and policy makers have room to act with interest rates and
quantitative measures. The currency has advanced 1% in March in Asia’s best
performance and is headed for the biggest monthly advance since September 2012.
Pound set for worst month in 2 years: As the BoE goes quiet and the UK parliament
is dissolved, the pound is heading for its worst month against the dollar in two years.
On the first day of the general election campaign and with polls suggesting there’ll
be no clear winner, a gauge of volatility on the UK currency approached the highest
level since September 2011. Nikko Asset Management Europe is reducing its
holdings in the UK as it awaits more clarity on the outcome of the May 7 election.
Bond market inflation outlook picks up, eroding treasury yields: The bond
market’s inflation outlook is picking up. Investors increased their forecasts for gains
in global consumer prices to 1.42% annually, the highest level in 21 months, based
on Bank of America Merrill Lynch indexes. The figure is about equal to the US
Treasury five year yield, meaning investors who hold that security wouldn’t earn
anything after inflation if the gauge proves correct. (Sources: Bloomberg, Reuters, AEW Europe)
3M
0.02
0.57
0.13
INTEREST RATES (%)
EURO SWAP
UK SWAP
US FED FUNDS SWAP
1YR
0.09
0.71
0.48
2YRS
0.09
0.87
0.86
3YRS
0.13
1.04
1.18
5YRS
0.26
1.31
1.60
10YRS
0.58
1.65
2.07
30YRS
0.87
1.94
2.41
Source: Macrobond
1YR
-0.25
0.34
-0.16
0.28
BOND YIELDS (%)
BUNDESBANK GERMANY
UK GILTS
BANQUE DE FRANCE
FEDERAL RESERVE
3YRS
-0.22
0.61
-0.13
5YRS
-0.09
1.04
0.06
1.43
0.98
7YRS
-0.02
1.27
0.19
10YRS
0.20
1.53
0.49
2.01
1.81
15YRS
0.49
2.02
0.78
2.37
30YRS
0.61
2.28
1.12
2.60
Source: Macrobond
% CHANGE YTD
18.39
21.54
4.69
0.15
20.34
CURRENT
EQUITY MARKETS
CAC 40
DAX
FTSE 100
S & P 500
EPRA DEV. EUROPE
5034
11868
6855
2061
639
% CHANGE 52 WK
14.96
25.57
4.05
11.47
43.60
% DIV YIELDS
2.85
2.45
3.49
1.91
2.84
Source: Macrobond
NEWS TICKER
REAL ESTATE MARKET INDICATORS
US consumer spending tepid; savings at two year high: US consumer spending
barely rose in February as households boosted savings to their highest level in more
than two years, the latest sign that the economy hit a soft patch in the first quarter.
The soft consumer spending data could see economists further lower their first quarter
growth estimates, which currently range between a 0.9% and 1.4% annualised pace.
The economy grew at a 2.2% annualised rate in the fourth quarter.
Economic confidence shows Eurozone recovery defies Greek risks: Eurozone
economic sentiment rose to the highest level in more than 3.5 years, adding to signs
that the fragile recovery is stabilising despite Greece’s struggle to secure funding. An
index of executive and consumer confidence jumped to 103.9 in March, the strongest
since June 2011. The report follows a string of positive data across the Eurozone that
has allowed ECB President Mario Draghi to strike an optimistic tone about the state
of the recovery.
Japan's inflation gauge halts at zero in February: The BoJ’s key inflation gauge
ground to a halt as consumer spending slumped, highlighting weakness in the nation’s
recovery from recession. The central bank’s measure that strips out last year’s salestax increase showed inflation at zero. Declines in household spending and retail sales,
and prospects for wage gains improve, indicate the lingering effect of an increase in
the sales tax last year.
Banks face global push to prepare for interest rate rise: Banks face a push from
international regulators for stiffer rules on the capital needed to handle an unexpected
rise in interest rates. Global central banks have pushed interest rates to historic lows
in a bid to counter the worst financial crisis since the Great Depression. Regulators
are concerned that some banks may not be prepared for when the monetary policy
tide turns and rates start to increase. (Sources: Bloomberg, Reuters, AEW Europe)
European logistics and industrial investment volumes surge to record high in
2014: European logistics and industrial investment volumes reached a record €21.1
billion during 2014, an increase of 28% y-o-y, according to JLL. The two leading
markets, the UK (€8.2 billion) and Germany (€3.6 billion), saw new national
records last year, driven by a flurry of portfolio transactions. New annual records
were also seen in the Czech Republic, Poland and Switzerland.
Student housing sees immense investor appetite: A recent flurry of major student
housing deals in the UK has put the asset class firmly in the spotlight and more is
on the way, according to JLL. There’s immense investor appetite for the sector,
which has been driven by interest in alternative investment markets. JLL also
predicts that around 30% of all commercial property transactions in the UK will
involve alternative assets by 2020.
Portuguese investment market to hit €1 billion in 2015: Commercial real estate
investment in Portugal is forecast to surpass the €1 billion mark in 2015, reaching
one of the highest figures on record, according to C&W. Consistent economic
improvement, higher levels of consumption, a better than expected unemployment
situation and an unruffled public debt market, are important factors for the positive
market evolution.
German property returns hit record high: German real estate returns are at their
highest level ever, according to MSCI. The firm’s annual IPD German Annual
Property Index returned 6% last year, up from 5.2% in 2013. The return, the highest
recorded since 1996, saw all market sectors perform above five, 10 and 15 year
averages. Total returns on industrial (12.2%), residential (7.9%) and retail (7.2%)
all outperformed the index. Only office properties underperformed, at 4.2%. (Sources:
SELECTED OFFICE MARKETS
Rocketing Oxford office take-up set to drive 5% increase in rents: According to
Carter Jonas, prime office rental values in Oxfordshire are expected to increase by
5% this year, with the rise to be accompanied by fewer incentives in the form of fitting
out costs and rent free periods. The forecast rent rise comes as a result of rocketing
office take-up, with total take-up in Oxfordshire rising to 425,000 sq ft in 2014, more
than double the total reached in 2013. It’s now certain that new tenants will have to
settle for second-hand space, because nothing new is being developed in Oxford and
the county. (Sources: Property Week, AEW Europe)
JLL, IP Real Estate, PropertyEU, AEW Europe)
SELECTED OFFICE MARKETS (Q4/2014 DATA)
VACANCY RATE
PARIS (CBD)
LONDON (CENTRAL)
BERLIN
WARSAW
MILAN
PRIME RENT
(€/SQM/YR)
733
1,351
270
270
445
↑
↓
↓
↓
↑
↑
→
→
↓
→
PRIME NET YIELDS
(%)
3.90
↓
3.82
↓
4.50
↓
5.85
→
5.38
↓
ECONOMIC
SENTIMENT
→
↑
↑
↑
→
Source: PMA, AEW Europe
SELECTED RETAIL MARKETS (Q4/2014 DATA)
SELECTED RETAIL MARKETS
West End retailers set to be hit by 80% rates hike: Retailers on London’s West
End shopping streets are set to be hit by increases to their business rates bills of up to
80% due to the next business rates revaluation, according to research by Gerald Eve.
The firm has undertaken a shadow revaluation of all 1.8m non-domestic properties in
England and identified that shops situated on Bond Street, Oxford Street and Regent
Street will pay a total of £293m a year as a result of the revaluation, a rise of £131m
on the previous 12 months. (Sources: Property Week, AEW Europe)
(%)
5.7
6.5
7.4
14.1
16.1
FRANCE
GERMANY
UK
ITALY
SPAIN
HOUSEHOLD
CONSUMPTION
2012 (%YOY)
HOUSEHOLD
CONSUMPTION
2013 (%YOY)
-0.4
0.8
1.5
-4.0
-2.8
0.3
0.9
2.2
-2.6
-2.1
AVERAGE PRIME
RENTS Q4 2014
(€/SQM/YR)**
2,900
3,420
3,030
2,185
2,180
→
↑
↑
→
→
AVERAGE PRIME
YIELDS Q4 2014
(%)**
4.56
3.88
4.75
5.28
4.50
→
↓
↓
→
↓
CONSENSUS
ANNUAL
INFLATION
2015E (%)
0.1
0.3
0.6
-0.1
-0.9
Source : PMA, Consensus Forecasts, AEW Europe * Private Consumption ** Average rent and prime yields of the
countries’ cities
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