Q2 Snapshot: • A record 35.5 MW of take-up across the four major markets of Europe. • London records its highest quarterly take-up in history and Paris stages a comeback after two years of below-par take-up. • 28MW of new supply added in the quarter, with most of it landing in London and Frankfurt.
Despite continuing globalization of the real estate industry and stronger cross-border interplay between the real estate and capital markets, the national markets are still dominated by national and regional characteristics The rental market is gaining considerably in importance over ownership, due to affordability factors, as well as the more flexible lifestyle it offers, in particular for younger people Both the importance of institutional investors and the size of the private letting market, in comparison with the state-controlled segment, vary considerably between countries and have strong influence on the availability of adequate numbers of housing units. Owner - Occupation varies between 78 percent in Spain and 34.6 percent in Switzerland
•The prime rent index remains unchanged in comparison to the first quarter of the year. •Strongest Q2 take-up level since 2009. •The EU-28 vacancy rate has fallen even further to its lowest level since the beginning of 2010. •Office sector investment falls the least as total investment decreases by 19% on the same quarter last year.
•CRE investment in Europe totalled €54.0 billion in Q2 2016, slightly up on Q1, though down on the €66.6 billion recorded in Q2 last year. •Lower levels of investment in Europe’s two largest markets; the UK and Germany, have dampened the European total. •The Irish market saw €2.3 billion transacted; a record level of activity. The total was boosted by a couple of high value transactions including Ireland’s largest shopping centre, the Blanchardstown Centre. •Of the main sectors offices had the strongest quarter, with €23.7 billion invested. This was a 8.3% increase on Q1 2016, driven by strong performance in the Nordic markets.
Capital Advisors Four Quadrants Report | August 2016 Edition The Four Quadrants report provides a holistic analysis of the ‘Four Quadrants’ of institutional real estate capital – private equity, public equity, private debt and public debt. The Four Quadrants Highlights Public Equity: • High stock market volatility persisted throughout Q2 2016 following a difficult start in Q1 • The Brexit vote has led to more pronounced performance divergence which was already an established trend in 2016 • The immediate Brexit effect was an anticipated flight to safety, where London specialists registered the largest falls, as opposed to German residential REITs which have gained c.20% year to date Private Equity: • Funds targeting Europe raised a healthy €15.8bn in H1 2016, consistent with the same period in 2014 and 2015, indicating significant dry powder • Secondary market activity registered good volumes. Pricing has come in and units in UK funds have moved into discount NAV territory • Brexit triggered a significant increase in redemption requests in UK funds with daily liquidity targeting retail clients. Suspensions and upcoming ongoing asset sales are watched for early re-pricing indicators Public Debt: • Corporate credit spreads showed resilience with very limited widening in response to the Brexit result. • UK CMBS were trading 50-60bps wider at the end of July in comparison with pre-Brexit levels indicating higher pricing for real estate debt. • No new CMBS issuance during Q2 due to limited traction of this financing route with sponsors or investors. Private Debt: • Lenders in the UK are showing a continued appetite for new business post-Brexit, although they have indicated a more prudent approach when considering new transactions. • We have started to see an increase in the margins quoted on new transactions, although this has been largely offset by the decrease in the 5 year swap rate. • Leverage for senior loans is expected to come in from 60-65% LTV to around 55% LTV.