Values rise across all asset classes at a faster pace than seen in the first quarter. The All Property Index rebounded to 1.2% on the quarter, driven by value growth in the Nordics, Germany and Southern Europe in particular.
The Office and Industrial sectors were the leading performers, with value growth of 1.6% and 1.4% respectively on Q1. Retail grew at a slower rate of 0.5%, though this was still a slight improvement on the previous quarter.
Grouping equivalent yields into quartiles, we see that there was yield compression across all quartiles, particularly in quartile 4. This serves as evidence that the European market is continuing to see yield compression across most asset types. However, the spread from quartile 4 to quartile 1 narrowed for the first time in nine quarters. This is likely to be a sign of the limited availability of top quality assets along with the historically low interest rates.
Over the quarter, the Nordics were the best performing at the All Property level, rising by 2.3%. This was mainly driven by the Office sector (3.2%). Germany followed with growth of 1.8% at the All Property level.
All Property values rose by 1.2% in the UK on the quarter which followed a similar trend to the preceding two quarters of 1.3% in Q1 and 1.1% in Q4.
The CEE Market Outlook 2016 analyses the results of 2015 in regards to investment, office, retail and industrial for Central and Eastern European countries and presents the forecast for 2016.
- Economic growth is the norm for almost all CEE countries, at a speed above that of Western Europe countries.
- The dominant cyclical factor is consumer spending, which is currently benefiting from a host of positive factors.
- Investment Volumes in CEE should be at minimum similar to those from 2015 (EUR 9.978 billion, except Russia).
- Historical high office demand is registered in almost all CEE countries, driven mostly by IT & outsourcing international occupiers.
- Buyont retail market, on the back of rise in private consumption, leading to tenants turnover increases and interest from investors in retail products.
- Even if industrial demand is reaching historically high numbers (in some cases up 65% compared to 10 year averages), there is limited speculative development.
- Hungary is a country that has grown under the radar for the past 12 – 18 months. With a number of indicators looking very promising – well past the region average –, we make a case for Hungary as the go-to-destination in 2016.
• E-commerce growth, changing consumer requirements, and a rise in automated technology are restructuring supply chains and changing the logistics landscape in Europe
• Making maximum use of a site is critical with strong pressure to store and handle as many units as possible whilst being in close proximity to core markets
• Not only can operations save on cost of land, they can also benefit from a cut in labour and transportation cost if they build vertically as opposed to outwards, or searching for cheaper space further afield
• CBRE has identified two main categories of vertical solutions likely to dominate the European logistics sector; high-bay structures and multi-level warehouses
• The uniformity of the goods handled in an operation is identified as the main factor in deciding on one of these vertical solutions
Online retail is here and it’s not going away. Retailers have to cope with the changing dynamic of the consumer. The requirement and expectation for high levels of service in store are also reflected in the offline world. The challenge for online is that the only area where the consumer can ‘feel’ the service is in terms of delivery. The delivery either meets expectation or it doesn’t. A number of key take outs are evident:
Consumers expect everything to work properly – the website, the delivery and return mechanics
Convenience and price remain key
Retailers need a clear omnichannel strategy – the retail, logistics and marketing aspects have to work together
‘Free’ delivery will only be sustainable for a few – customers want excellence in service whether that be in store or online – it’s about value not about being pseudo-free
Christmas and Black Friday is not the right time to make dramatic changes to delivery options or to technical infrastructure – get it right before these key times hit
Promising something and not delivering is far worse than never promising at all
Customers want to click-and-collect
Customers do not want to pay for the privilege of visiting a retailer’s store to collect something they have bought
A great online site is meaningless without an equally great logistics operation in place
In a general sense, e-commerce is strengthening the already visible polarisation of demand for warehouse space: large central hubs vs last mile parcel centres (‘demand dumbbell’)
There are no linear logistics responses to the various online delivery models; trial-and-error and hybrid tailor-made operations dominate, leading to a more prominent role for logistics service providers
The emphasis on convenience, customer satisfaction and an efficient return management is expected to lead to a more intricate network of last mile solutions: both parcel hubs and pick-up/drop-off sites.
The recent equity market volatility has focussed many minds on downside risk but there are good reasons to expect that European property will outperform other assets in 2016.
Office leasing is still in an early stage of recovery in many European countries/cities, and occupier demand will continue to improve as the economic recovery continues.
Office vacancy rates fell at the fastest rate since 2007 in 2015 and are expected to fall further in 2016 helped by a so-far limited development response in most markets.
The dichotomy between high performing prime and struggling secondary retail will remain in 2016 but at least rising retail spending on the back of higher real disposable incomes will be of some benefit to all retail.
There is increasing emphasis on city logistics property with investors as well as occupiers attracted by the necessity of these properties in e-commerce supply chains.
Pro-business new coalition will encourage economic growth
After complex negotiations that took 206 days, the new coalition agreement named “Confidence in the future” was presented on October 10th 2017. The programme contains an agreement between four parties with divergent political views: the liberal party “VVD”, Christian-conservative party “CDA”, democrats “D66” and Christian-social/green party “CU”. The plans of this pro-business government are expected to further spur the already well-performing Dutch economy. This has positive effects on the main drivers of real estate markets such as decreasing unemployment, increasing wages and rising consumption. However, not all plans will benefit the real estate market. The planned discontinuation of dividend taxes will smoothen the dividend pay-outs to foreign shareholders, but adversely affect investment vehicles with corporate tax exemptions, such as REITs. If the plans materialise, these funds will have to pay corporate taxes.
Strong employment growth benefits the office market;
Increasing consumption will facilitate growth in retail and logistic markets;
Opportunities for residential investments in the mid-market rental segment and sustainability-oriented investments.
Take-up in the Dublin industrial & logistics sector reached 48,863m2 in Q3 2017, bringing total take-up in the first nine months of 2017 to almost 170,000m2 - down approximately 20% on the volume of take-up recorded in this sector in the
same period last year
Take-up continues to be constrained by a scarcity of modern premises in core locations
Lettings of industrial buildings accounted for 63% of industrial take-up in Dublin in the quarter
In total, there were 38 industrial transactions signed in Dublin in Q3 2017 of which 24 comprised lettings and 14 comprised sales
Transactional activity in the industrial sector during Q3 2017 was primarily focused on the Dublin North West (N3) corridor which accounted for 30% of Q3 take-up
Prime industrial rents in the capital remain stable at approximately €99.50 per square metre at the end of Q3, having increased by 6% in the first half of 2017
The Property Handbook is a guide for investors that wish to learn more about the Portuguese property market. In this publication we provide an economic outlook, show the market evolution over the past 10 years on the investment and occupation side (including office, retail, logistics, tourism and industrial sectors) as well as the current property legal and fiscal framework. In At a Glance we provide a summary of the complete guide contents.
Demand for industrial & logistics remains strong with the sector rapidly moving towards larger and more technologically advanced warehouses. Multi-modality is highly sought after, and e-commerce, consolidation and economies of scale are significant driver of logistics market activity, as shorter delivery times and efficiency gains are propelling the distribution sector
Vacancy rate continues to decrease due to almost zero new completions volume
* 21,100 sq m of new office premises have been delivered in H1 2017 in Moscow, which is absolutely the lowest for over a last decade.
* Office vacancy rate remains on the downwards trend reaching 15.4% by the end of Q2 2017 which is 0.5 ppts lower compared to the 2016 year end and 1.3 ppts lower compared to H1 2016.
* Moscow office market demand has remained stable for the fourth semi-annual period indicating comparable take-up volumes. H1 2017 have experienced 530,400 sq m new leased and purchased for end-using purposes premises with just 4% lower compared to H1 2016