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EUROPEAN INVESTMENT
MARKET July 2014
2 CBRE | EUROPEAN VALUATION MONITOR
Economic
trends
Major markets +
Key transactions Outlook
3 CBRE | EUROPEAN VALUATION MONITOR
Economic
trends
Major markets +
Key transactions Outlook
4 CBRE | EUROPEAN VALUATION MONITOR
Economic sentiment, vs long-run average
SENTIMENT HAS IMPROVED
(20) (15) (10) (5) 0 5 10 15 20
France
Italy
Spain
EU Average
Germany
UK
April 14
April 13
Source: Eurostat
5 CBRE | EUROPEAN VALUATION MONITOR
80
90
100
110
120
130
140
20
04
Q1
20
05
Q1
20
06
Q1
20
07
Q1
20
08
Q1
20
09
Q1
20
10
Q1
20
11
Q1
20
12
Q1
20
13
Q1
20
14
Q1
20
15
Q1
20
16
Q1
20
17
Q1
20
18
Q1
20
19
Q1
Eurozone
France
Germany
Italy
Spain
United Kingdom
Source: CBRE Research, Oxford Economics
Q1 2004 = 100
REAL EUROPEAN GDP INDEXED TO 2004
Index
6 CBRE | EUROPEAN VALUATION MONITOR
VARIED ECONOMIC OUTLOOK
Average annual GDP growth
2014-2016
3.5% and above
2.6% to 3.4%
1.5% to 2.5%
0.5% to 1.4% RUSSIA
IRELAND UK
SWEDEN
NORWAY FINLAND
NETHERLANDS
BELGIUM GERMANY
FRANCE
SPAIN
PORTUGAL
ITALY
SWITZERLAND
LUXEMBOURG
CZECH
REPUBLIC
POLAND
AUSTRIA
BELARUS
UKRAINE
ROMANIA
SLOVAKIA
HUNGARY
SLOVENIA
GREECE
BULGARIA
CROATIA
SERBIA
LITHUANIA
LATVIA
ESTONIA
MOLDOVA
BOSNIA AND HERZEGOVINA
ALBANIA MACEDONIA
TURKEY
ICELAND
MONTENEGRO
DENMARK
7 CBRE | EUROPEAN VALUATION MONITOR
Office (regions)
EVM EUROPEAN VALUE INDICES
Q4 2007 = 100
Source: CBRE Valuation
45
55
65
75
85
95
105
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10
Q2
10
Q3
10
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1
12
Q2 1
2
Q3
12
Q4
12
Q1
13
Q2
13
Q3
13
Q4
13
Q1
14
France
Germany
UK
Italy
Spain
8 CBRE | EUROPEAN VALUATION MONITOR
(30)
(20)
(10)
0
10
20
30
40
50
60
Q1
20
03
Q1
20
04
Q1
20
05
Q1
20
06
Q1
20
07
Q1
20
08
Q1
20
09
Q1
20
10
Q1
20
11
Q1
20
12
Q1 2
013
Q1
20
14
Office
Quarterly yield shift in the EU-15 countries
INCREASING INVESTMENT HAS PUSHED DOWN YIELDS
Q-on-Q Change (Bps)
Source: CBRE Research
9 CBRE | EUROPEAN VALUATION MONITOR
All Property
SPREAD OF PRIME AND SECONDARY YIELDS
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
Spread
Prime
Secondary
Source: CBRE Valuation
Percentage Points
10 CBRE | EUROPEAN VALUATION MONITOR
Source: CBRE Research
EUROPEAN CRE in 2013 €166 billion
EUROPEAN CRE in 2012 €128 billion
North
America 2013 €20.5 billion
2012 €11.9 billion
Asia 2013 €9.9 billion 2012 €4.9 billion
Australia 2013 €0.6 billion 2012 €0.2 billion
Middle East 2013 €9.85 billion
2012 €5.8 billion
11 CBRE | EUROPEAN VALUATION MONITOR
0
50
100
150
200
250
300
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H12014*
COMMERCIAL REAL ESTATE INVESTMENT IN EUROPE
Billion €
Source: CBRE Research
* Preliminary results
12 CBRE | EUROPEAN VALUATION MONITOR
0
5
10
15
20
25
30
35
Lon
don
Ne
w Y
ork
Pari
s (
IDF
)
Tokyo
Ho
ng
Kon
g
Sin
ga
po
re
Sydn
ey
Sha
ngh
ai
Housto
n
Chic
ago
Mu
nic
h
Domestic
Intra-regional
Cross-regional
LONDON A MAJOR TARGET Billion €
Source: CBRE Research
Note: * All commercial real estate and hotels
13 CBRE | EUROPEAN VALUATION MONITOR
INTERNATIONAL INVESTMENT IN EUROPE
24%
15%
15% 4% 1% 1%
11%
7%
22% USA
Asia
Middle East
Canada
Australia
Other Global
Germany
UK
Other European
2013
Source: CBRE Research
14 CBRE | EUROPEAN VALUATION MONITOR
Destination hierarchy
GLOBAL INVESTORS
TRADITIONAL PRIME
HIGHER GROWTH POTENTIAL OPPORTUNITIES
London
Paris
Major German cities
UK Regions
Major cities –
Rest of Europe
Spain | Portugal | Italy
15 CBRE | EUROPEAN VALUATION MONITOR
Economic
trends
Major markets +
Key transactions Outlook
UK
17 CBRE | EUROPEAN VALUATION MONITOR
Market highlights
UNITED KINGDOM
Country overview
Population 64.2 million
GDP output (2013) £1.5 trillion
Investment market
CRE investment 2013 £54 billion (Central London: 50%)
Prime yield 3.75% - 4.5%
Prime rent p/sq m £1,130
Market structure
Typical lease length 10 years
VAT 21%
Transfer tax 4% stamp duty
18 CBRE | EUROPEAN VALUATION MONITOR
1 Lime Street, EC3, London
THE LLOYDS BUILDING
Purchaser: Ping An
Vendor: CLI Group
Q3 2013
348,000 sq ft
£260m
19 CBRE | EUROPEAN VALUATION MONITOR
61 Aldwych, WC2, London
CENTRIUM
Purchaser: China Overseas
Holdings
Vendor: GLL
Q4 2013
179,712 sq ft
£170m
20 CBRE | EUROPEAN VALUATION MONITOR
London West End, W1
HANOVER SQUARE ESTATE
Purchaser: HKMA
Vendor: Great Portland Estate
Q4 2013
208,000 sq ft
£101m
21 CBRE | EUROPEAN VALUATION MONITOR
Canary Wharf, London
10 UPPER BANK STREET
Vendor: Clifford Chance
Purchaser: China Life Insurance
Q2 2014
93,000 sq m
£795m
FRANCE
23 CBRE | EUROPEAN VALUATION MONITOR
Market highlights
FRANCE
Country overview
Population 65.8 million
GDP output (2013) €2.1 trillion
Investment market
CRE investment 2013 €16.4 billion (Paris: 68%)
Prime yield 4% - 4.5%
Prime rent p/sq m €800
Market structure
Typical lease length 3/6/9 years
VAT 20%
Transfer tax 5.9% stamp duty
24 CBRE | EUROPEAN VALUATION MONITOR
Paris, La Defense
TOUR ADRIA
Purchaser: Primonial
Vendor: Testa
Q3 2013
54,000 sq m
€450m
25 CBRE | EUROPEAN VALUATION MONITOR
Paris, 9ème
ROSSINI
Purchaser: Aviva
Vendor: Innovalis
Q1 2014
6,270 sq m
In excess of €90m
GERMANY
27 CBRE | EUROPEAN VALUATION MONITOR
Market highlights
GERMANY
Country overview
Population 81.8 million
GDP output (2013) €2.5 trillion
Investment market
CRE investment 2013 €30.4 billion
Prime yield 4.5% - 5%
Prime rent p/sq m €456
Market structure
Typical lease length 5+5 years
VAT 19%
Transfer tax 3.5% - 6.5%
28 CBRE | EUROPEAN VALUATION MONITOR
Office
GERMANY PRIME RENTS
€ per sq m pa
Source: CBRE Research
200
250
300
350
400
450
500
550
600
650
700
Q1
07
Q3
07
Q1
08
Q3
08
Q1
09
Q3
09
Q1
10
Q3
10
Q1
11
Q3
11
Q1
12
Q3
12
Q1
13
Q3
13
Q1
14
Frankfurt
Munich
Hamburg
Berlin
29 CBRE | EUROPEAN VALUATION MONITOR
Office
GERMANY PRIME YIELDS
%
Source: CBRE Research
4.00
4.20
4.40
4.60
4.80
5.00
5.20
5.40
5.60
5.80
6.00
Q1
07
Q3
07
Q1
08
Q3
08
Q1
09
Q3
09
Q1
10
Q3
10
Q1
11
Q3
11
Q1
12
Q3
12
Q1
13
Q3
13
Q1
14
Berlin
Frankfurt
Hamburg
Munich
30 CBRE | EUROPEAN VALUATION MONITOR
60327 Frankfurt am Main, Germany
TOWER 185
Purchaser: PwC Pension Fund
Vendor: CA Immo Deutschland GmbH
Q3 2013
100,201 sq m
Asset value in excess of €500m
31 CBRE | EUROPEAN VALUATION MONITOR
Munich, Germany
SIEMENS FORUM
Purchaser: NPS with Hines
Vendor: Siemens RE
Q3 2013
32,000 sq m
€151m
32 CBRE | EUROPEAN VALUATION MONITOR
Berlin, Germany
LINDENCORSO
Purchaser: Generali
Vendor: Lindencorso Grundstucks
Q2 2013
28,700 sq m
€150m
SPAIN
34 CBRE | EUROPEAN VALUATION MONITOR
Market highlights
SPAIN
Country overview
Population 60.7 million
GDP output (2013) €1 trillion
Investment market
CRE investment 2013 €64 billion (Madrid 35%, Barcelona 21%)
Prime yield 5.75%
Prime rent p/sq m €294
Market structure
Typical lease length 3-5 years
VAT 21%
Transfer tax 7% (+1.5% stamp duty)
35 CBRE | EUROPEAN VALUATION MONITOR
Purchaser: PSP
Vendor: Santander, BBVA, Sabadell and
Sareb
Under offer
Mixed-use office: 37,750 sq m
€140m
Madrid, Spain
CASTELLANA 200
ITALY
37 CBRE | EUROPEAN VALUATION MONITOR
Market highlights
ITALY
Country overview
Population 46.4 million
GDP output €1.4 trillion
Investment market
CRE investment 2013 €4.8 billion (Milan 31%, Rome 21%)
Prime yield 6.00%
Prime rent p/sq m €480
Market structure
Typical lease length 6 + 6 years
VAT 21%
Transfer tax 4% for non-Italian investors
38 CBRE | EUROPEAN VALUATION MONITOR
Milan, Italy
PORTA NUOVA
Purchaser: Qatar Holdings
Vendor: Hines Italia Sgr
Q1 2013
250,000 sq m
€600m
39 CBRE | EUROPEAN VALUATION MONITOR
Milan, Italy
SANTA MARGHERITA
Purchaser: Qatar - Sovereign Wealth
Fund
Vendor: Tishman Speyer
Q1 2014
131,987 sq ft
€105m
40 CBRE | EUROPEAN VALUATION MONITOR
Economic
trends
Major markets +
Key transactions Outlook
41 CBRE | EUROPEAN VALUATION MONITOR
Outlook
10-YEAR GOVERNMENT BOND YIELDS
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
UK
Germany
Italy
Percent
42 CBRE | EUROPEAN VALUATION MONITOR
Outlook
PRIME OFFICE YIELDS
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Munich
Milan
London West End
Percent
43 CBRE | EUROPEAN VALUATION MONITOR
5 years to 2019 (local currency*)
PRIME OFFICES TOTAL RETURNS
Percent per annum
0 2 4 6 8 10 12 14
Paris
Berlin
Frankfurt
Munich
London (City)
London (West End)
Paris (La Defense)
Milan
Rome
Barcelona
Madrid
Dublin
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