•BOTH PRIME HIGH STREET AND SHOPPING CENTRES SEE POSITIVE BUT SLOWING RENTAL GROWTH IN Q4
The CBRE Prime High Street rent index grew by 0.5% q-o-q and 5.0% y-o-y. There has been a consistent slowing of the rental index since Q2 2015.
•CONSUMER CONFIDENCE CONTINUED TO IMPROVE IN Q4
Consumer confidence continued to improve in Q4 from the lows witnessed after Brexit. The confident outlook has had a similar effect on retailer confidence and retail trade volumes in the last 3 months of the year.
•EUROPEAN RETAIL INVESTMENT TOTALLED €17 BILLION IN Q4, up 33% q-o-q
Germany remained the largest target market for European retail investment in Q4, however the UK has attracted more investment over 2016. Retail investment is up significantly on Q3 totals but remains down on the highs witnessed in 2015.
This year’s guide is the largest and most comprehensive yet with 64 EMEA cities featured including certain global hubs such as Hong Kong, New York City and Mexico City. Throughout the guide we demonstrate how traditional office settings compare to the more wide spread application of agile working environments.
The technology sector has been one of the strongest drivers of European office markets over recent years. In this report, we invite commercial real estate investors and technology companies to explore our insights into the location and character of tech hubs across Europe; to enhance understanding of the fundamental characteristics of tech clusters; and to identify future opportunities among highperforming, and emerging, tech cities.
Expect a year of political uncertainty and the challenge of rising interest rates in Europe in 2017
Politics aside, however, the gradual tightening of some occupier markets seen in 2016 will continue in 2017, especially for better properties in the better locations
Despite a gradual turnaround in the long-term interest rate trend, there is still scope for further yield compression in prime assets as rental growth and low interest rates by historical standards continues to make property look attractive
2018 or 2019, rather than 2017 are likely to be the years when the yield cycle starts to turn
From a real estate perspective, global gateway cities offer many benefits. Their attractiveness to people and businesses means that space demand in their commercial real estate markets increases steadily over the long term, underpinning rent growth. These cities are also highly liquid markets, where real estate investments can be readily bought and sold. We have compiled this new report so that those looking to invest in one or more of the world’s great cities can quickly and easily understand pricing and market conditions.
•There seems to be an ongoing discussion about the current pricing, the influx of foreign capital into the Danish property market and the contraction of the Danish prime yields over the last 24 months’ period.
•The performance of the Danish property market is strong, with the total 2016 investment volume expected to reach some DKK 60 billion, 25% above the 2015-level.
•Copenhagen prime office and retail yields stand at 4.10% and 3.30% respectively as at Q3 2016, the lowest levels in the last twenty years.
One perception openly held in the market is that the Nordic Region is set for significant growth with new demand, new build and new market entrants. It is believed that local and international investment, across the region will be significant as lower power costs, abundant resources of green energy, connectivity, taxation incentives, and natural cooling efficiencies present a formidable array of benefits for users.
The following is an executive review of the discussion that occurred during a breakfast hosted by CBRE on the subject of the data hosting landscape, market dynamics and demand spread across the hyper scale cloud, wholesale and retail colocation markets.
• 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
As we move towards the busy 4th quarter trading period, this report highlights some of the major trends seen in European commercial property markets so far in 2016. The big event in the political sphere was undoubtedly the surprise result in the UK referendum but excluding the UK, the demand for real estate in Europe has remained strong.
Of the 35 largest non-UK office markets in Europe, prime office yields have continued to fall in 22 of them so far in 2016 with yields remaining stable. The pattern of office leasing across the European markets continues to reflect the economic situation: positive but slow growth with some marked differences from place to place reflecting offsets in the timing of cycles; all tempered with a degree of caution from the lead-up to, and result of, the EU referendum in the UK.
The increased attraction of prime property is linked to the policy adopted by the ECB over the past two years. We now have negative short-term policy rates and very low long-term government bond yields. This has pushed investors towards alternative “near bond-like” assets which offer some characteristics of fixed income and security. Prime property goes some way to fitting the description and steadily rising rents and falling vacancy have helped to make the case.
The majority of retail markets across Europe have seen positive retail sales volume growth so far in 2016 and the EU average growth rate has been a healthy 3.2% .
The industrial & logistics markets have also performed well so far in 2016 even in the UK, where logistics occupier demand was surprisingly strong amidst a general referendum-linked slowdown.
Although uncertainty around the impact of the referendum will weigh on parts of the UK market, continuing economic growth and an ongoing very low interest rate environment will continue to drive real occupier and investor demand over the rest of 2016 and into 2017 despite the plethora of elections and referenda still to come.
•Reverse logistics is the backward flow of what we all wish would be a forward-only process. Retailer’s ability to master returns has a direct impact on the costs of doing business.
•E-commerce is growing in popularity all around the world; specifically, Danes purchased items worth approximately EUR 6.7 billion online in H1 20161, a growth of almost 15% from the same period last year. The total 2016 e-commerce volume is expected to reach EUR 13.4 billion (EUR 10.4 billion in 2015). With the volume of online shopping growing at a rapid pace, the number of returns is increasing.
•According to the Danish E-Commerce Association (FDIH), in 2015 some 2.5% of online purchased goods were sent back. In the ‘Clothes, Shoes and Jewellery’ category, the return rate increases to 4.6%.
This ViewPoint looks at what might happen now that the UK has voted to leave the EU. It discusses the likely timetable for Brexit, the possible impact on the UK economy and what alternative trade structures might be available for the UK to join.
This report goes into further detail on which UK industry sectors might be affected and which European cities might benefit from Brexit relocation. It concludes by looking at what the wider impact on the rest of the EU might be — negative as well as positive.
The referendum has happened and there has been a vote to leave the EU. But there is considerable uncertainty over how long the process will take and over what the eventual relationship between the UK and EU will be.
We believe that leaving will neither be quick nor dramatic in its effects. Rather, we expect a ‘long goodbye’ stretched out over two years or more. Article 50 of the Lisbon Treaty provides for a two-year exit period once a member state decides to leave, but the UK looks unlikely to serve a formal decision any time soon.
We think the Article 50 notice is not likely to be served until late 2017 at the earliest.
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 Referendum outcome leaves Britain unsure of what it has done and the world unsure of the wider implications. The complex task of unwinding and resetting the UK’s relationship with the EU is likely to take many years and dominate UK and, possibly, EU politics for the foreseeable future. There are implications for the whole of the EU not just the UK and these could be both positive and negative.
•The level of foreign investments has increased more than twelve times in relation to the foreign investment level in 2009 which was around EUR 1 billion 1.
•U.K. and North America have the highest growth rates of cross-border investors.
•Investors from within the Nordic Region historically dominate the Nordic investment market.
•Foreign investment flows are negatively and more significantly correlated with yield movements than domestic investment flows.
Due to its impact and distinctive features, the increase in cross-border investments has experienced an increased interest. As a result, cross-border investments (i.e., foreign investments), has become an interesting topic in the academic commercial real estate literature
How did the surge in foreign investments affect Nordic yields in recent years?
Better Never Rests
Based in Helsinki, CBRE Finland Oy focuses on providing superior services in the commercial real estate markets throughout Finland. Our professionals specialize in the sale, acquisition, leasing and valuation of offices, retail units, shopping centres, and industrial and logistics parks.
CBRE Finland Oy provides the full spectrum of property consultancy services - including investment, agency and general advice to a wide range of clients, such as national and international companies and institutional and private investors.