At a glance MAIN INVESTMENT MARKETS IN WESTERN EUROPE ESTATE P PARIB IBAS REAL ESTATE TE AS R Real estate investment volume - rolling year billion 9 8 7 6 5 4 3 2 1 25 26 27 28 29 21 211 212 213 Real estate investment volume Real estate average prime yields 25 26 27 28 29 21 211 REAL ESTATE P PARIBAS RE billion MAIN INVESTMENT MARKETS EXCITE INVESTORS INTEREST Economic activity finally switched back to growth in Q2 213 (+.3%), posting the first increase since late 211. Domestic demand was a key factor behind this rebound and may suggest that the recovery has legs. In the UK, the recovery gathered momentum in Q2 (+.7%); and the growth prospect for overall 213 is likely to reach +%. Both France (+.5%) and Germany (+.7%) recorded stronger than expected GDP growth in Q2; but in most of the Southern European countries the economic decline deepened albeit at a slower pace. However, some caution is needed. Domestic demand, although improving, is still fragile while the external sector may suffer from a slowdown in global activity. Moreover, a gradual moderation in fiscal tightening might pose problems in the medium-term. On the commercial real estate market side, while office occupier markets continue to dip, investment activity remains healthy and prospering. Indeed, the commercial real estate investment volume in our nine primary markets amounted to 35.4bn over the first three quarters of 213, representing a 2% increase on the same 9 8 7 6 5 4 3 2 1 Q1 Q2 Q3 Q4 25 26 27 28 29 21 211 212 213 period last year. Paris and all four big German cities have momentum behind them; pushed by a dynamic office investment market they each recorded an average growth of 27% over the first nine months of 213. Office investment volume in London over 213 remained on a par with the first nine months of 212. London s total turnover outclassed the eight other main real estate markets, with 14bn invested since the beginning of 213. Smaller markets such as Brussels, Milan and Madrid continue to pick up. Brussels tripled its office investment volume over the first three quarters of 213 resulting in a 7% growth of its total investment volume compared to 212. Although experiencing a flat third quarter in 213, Milan more than doubled its volume of investment over the first nine months of 213. Total turnover in Madrid soared during the first three quarters of 213, with volumes four times greater compared to the same period of 212. Compared to the previous quarter, office prime yields remain unchanged in. However, they dropped between 5bp and 15bp in the four German cities and rose by 65bp in Madrid over a year. The retail prime yields observed the same trend. Céline Cotasson - Fauvet Senior Analyst - Investment and Hotels BNP P 8 7 6 5 4 3 % Retail Real estate investment volume % 1 8 6 4 2 Office Industrial 212 213 Office Retail Industrial Hotels Other 29 21 211 212 213* *First nine months 213 1 E P PARIBAS REAL EST ARIBAS REAL ESTATE A BAS REAL ESTATE
Real estate investment volume billion billion 6.5 5.2 3.9 2.6 1.3 London Paris Office investment volume and prime yields 2. 1.6 1.2.8.4 ESTATE P PARIB IBAS REAL ESTATE TE AS R billion % billion 5 4 3 2 1 London Paris Retail investment volume and prime yields million 1, 8 1.2.9.6.3 AT A GLANCE - MAIN INVESTMENT MARKETS IN WESTERN EUROPE - OCTOBER 213 REAL ESTATE P PARIBAS RE 6 4 2 London Paris 7.5 6. 4.5 3. BNP P Berlin Munich Frankfurt Hamburg Berlin Munich Frankfurt Hamburg Berlin Munich Frankfurt Hamburg Brussels Madrid Milan Brussels Madrid Milan Office prime yield % Brussels Madrid Milan Retail prime yield 7.5 6. 4.5 3. % 7.5 6. 4.5 3. 2 E P PARIBAS REAL EST ARIBAS REAL ESTATE A BAS REAL ESTATE
MAIN INVESTMENT MARKET INDICATORS Total real estate investment market ESTATE P PARIB IBAS REAL ESTATE TE AS R AT A GLANCE - MAIN INVESTMENT MARKETS IN WESTERN EUROPE - OCTOBER 213 ( million) y-o-y y-o-y London 19,41 17,986 +6 6,24 4,35 +45 Paris 14,92 12,459 +13 3,96 2,335 +7 Berlin 4,86 2,835 +44 743 1,9-26 Munich 4,58 3,424 +19 1,27 736 +4 Frankfurt 3,967 2,236 +77 424 527-2 Hamburg 2,65 1,9 +37 535 582-8 Brussels 931 534 +74 131 99 +32 Madrid 1,92 769 +42 34 3 +897 Milan 958 477 +11 92-1 London in 16,271 15,37 5,333 3,679 Office investment market ( million) y-o-y Share of total volume Net prime yield Q2 213 London 15,597 15,29 3 5,87 82 85 4. 4. 4. Paris 1,752 9,97 8 3,328 76 8 4.5 4.5 4.5 Berlin 1,747 1,553 12 216 43 55 4.8 4.8 4.95 Munich 3,163 2,399 32 82 78 7 4.6 4.6 4.7 Frankfurt 2,594 1,418 83 93 65 63 4.75 4.75 4.9 Hamburg 1,455 921 58 221 56 48 4.7 4.7 4.75 Brussels 815 287 184 131 87 54 5. 5. 5. Madrid 576 569 1 36 53 74 6.25 6.25 5.6 Milan 476 259 84 5 54 5.6 5.6 5.6 London in 13,328 12,997 4,347 REAL ESTATE P PARIBAS RE Constant exchange rate (average ) : / = 1.172 BNP P 3 E P PARIBAS REAL EST ARIBAS REAL ESTATE A BAS REAL ESTATE
MAIN INVESTMENT MARKET INDICATORS Retail investment market ( million) y-o-y ESTATE P PARIB IBAS REAL ESTATE TE AS R AT A GLANCE - MAIN INVESTMENT MARKETS IN WESTERN EUROPE - OCTOBER 213 Share of total volume Net prime yield Q2 213 London 761 82-7 27 4 5 3. 3. 3. Paris 1,2 1,57-32 25 7 12 4. 4. 4. Berlin 1,712 664 +158 444 42 23 4.35 4.35 4.5 Munich 19 732-74 5 21 4.5 4.5 4.2 Frankfurt 82 431 +9 14 21 19 4.3 4.3 4.45 Hamburg 575 571 +1 231 22 3 4.1 4.1 4.25 Brussels 62 143-57 7 27 4.25 4.25 4.25 Madrid 69 14-34 48 6 14 5.6 5.6 5.5 Milan 67 1-33 7 21 n.a 4.6 4.6 London in 65 71 231 Industrial investment market ( million) y-o-y Share of total volume Net prime yield * Q2 213 London 1 176-94 1 5.75 6. 6. Paris 332 34 +9 99 2 2 7.15 7.15 7.15 Berlin 67 72-7 38 2 3 6.85 6.85 6.85 Munich 339 91 +271 9 8 3 6.6 6.6 6.6 Frankfurt 16 72 +123 66 4 3 6.5 6.5 6.5 Hamburg 22 181 +12 37 8 1 6.6 6.6 6.6 Brussels 55 66-17 6 12 7.25 7.25 7.25 Madrid 2 51-62 2 7 8. 8. 8. Milan 32-1 7 7.8 7.75 7.75 London in 9 151 * Industrial prime yields are for Heathrow and Greater Paris REAL ESTATE P PARIBAS RE Constant exchange rate (average ) : / = 1.172 BNP P 4 E P PARIBAS REAL EST ARIBAS REAL ESTATE A BAS REAL ESTATE
GLOSSARY BNP Paribas Real Estate is working on producing indicators which are as comparable as possible. This is a complex issue, due to cultural differences from market to market. Nevertheless, as we aim to actively contribute to the transparency of the markets, we have highlighted those definitions and indicators which are strictly comparable, so that our readers can understand what the indicators mean. Furthermore we have decided to adopt the PEPCIG 1 definitions, on which most of the following indicators published by BNP Paribas Real Estate are based. Other indicators are from INREV 2 and from BNP Paribas Real Estate. Business District average rent is the average of each of the last four quarters average headline rent in the CBD. Each quarterly average rent is weighted by the surface of each lease signed during the quarter, in either new or second-hand premises. The definition of CBD corresponds to local conventions. Completions represent the total amount of floor space that has reached practical completion and is occupied, ready for occupation or an occupancy permit where required has been issued during the survey period. London includes the following districts: West End, Midtown, City, Docklands, Southbank, Western Fringe and Northern Fringe. Paris includes the following districts: CBD, Paris out of CBD, La Défense, Western Crescent and Inner Rim. Core Investment Vehicles target returns at 1% and lower, with gearing level up to 6% of Gross Asset Value. ESTATE P PARIB IBAS REAL ESTATE TE AS R Closed Ended Fund is a vehicle that has a targeted range of investor capital and a finite life. Development Pipeline represents the total amount of floor space for all developments under construction aand/or schemes (including major refurbishments) that have the potential to be built in the future through having a secured level of planning permission but remain unimplemented at the survey date. It includes all proposed new buildings, those constructed behind retained facades and buildings (or parts of buildings) undergoing a change of use to offices. Exchange Rate from into for rents is the average value observed over the quarter. Exchange Rate from into for investment volumes for each quarter is the average value over that period. Full-year investment volumes in both currencies are made up by adding the four quarters of each year. German Open Ended Fund is a public vehicle that does not have a finite life, continually accepts new investor capital and makes new property investments. The list of German Open Ended Funds is published by the BVI (Bundesverband Investment und Asset Management e.v.). Gross Asset Value is the sum of the Gross Capital Value of properties, cash and marketable securities and other (non-operating) assets. takes into account all commercial properties BNP Paribas Real Estate is aware of, whose owner has changed during the studied period, whatever the purchasing price. It includes Office buildings, Retail (supermarkets, hypermarkets), Industrial and Logistics Warehousing and Others (Hotels, Cinema, Leisure, Car Parks, Care Homes, parts of portfolio which can not be split up by product, and Development Sites in Germany). Quoted investment volumes are not definitive and are consequently subject to change. Initial Prime Gross Yield is defined as Gross income (i.e. income before costs of ownership) over purchase price excluding costs of acquisition. AT A GLANCE - MAIN INVESTMENT MARKETS IN WESTERN EUROPE - OCTOBER 213 REAL ESTATE P PARIBAS RE Initial Prime Net Yield is defined as Net income (or NOI) over purchase price plus all other costs of acquisition. Prime Rent represents the top open-market rent at the survey date for an office unit: - of standard size commensurate with demand in each location - of the highest quality and specification - in the best location in a market by investor/seller type refers to the following categories: Insurance, Private Investors, Public Sector, Corporates, Property Companies & REITS, Consortium, Funds and Other. by investor/seller nationality refers to the following categories: Eurozone, Non-Eurozone, North America, Other America, Asia, Middle East, Australia, International and Other. Major Refurbishments represents refurbishments, where building work must involve either structural alteration, and/or the substantial replacement of the main services and finishes. The quality of the floor space must have been substantially improved from its previous condition so as to offer accommodation of a modern standard although not necessarily to the standard of a completely new building. Opportunistic Investment Vehicles target returns in excess of 17%, with gearing levels above 6% of Gross Asset Value. Actual transactions are used in France, Germany and Belgium to support the headline prime rental quoted, but one-off deals, which do not represent the market, are disregarded. In the UK & Spain, if there are no prime transactions during the survey period a hypothetical rent is quoted, based on expert opinion of market conditions. Space calculation differs in Spain, where figures in m² (Take-Up, Vacancy, Pipeline, Completions) as well as Rental values are based on Gross Letting Area space, contrary to the other main European markets, which use Net Letting Area. In order to make the Spanish figures comparable across all monitored markets, they should be multiplied by.82 (NLA =.82 GLA). This ratio is applied by BNP Paribas Real Estate to produce international indices and benchmarks. Take-Up represents the total floor space known to have been let or pre-let, sold or pre-sold to tenants or owner-occupiers during the survey period. It does not include space that is under offer - A property is deemed to be taken-up only when contracts are signed or a binding agreement exists - Pre-let refers to take-up that was either in the planning or construction stage - All deals (including pre-lets) are recorded in the period in which they are signed - Contract renewals are not included - Sales and leasebacks are not included as there had been no change in occupation - Quoted take-up volumes are not definitive and are consequently subject to change. The breakdown of take-up by business sector is compatible with the European NACE code. Under Construction represents the total amount of floor space in properties where construction has commenced on a new development or a major refurbishment (see separate definition) at the survey date. It includes properties for owner occupation, which are reported separately. It does not include sites being cleared for possible development in the future. Property that is under construction but pre-let or for owner occupation is recorded separately where appropriate. Value-added Investment Vehicles target returns of 1% to 17%, with gearing levels between 3% and 7% of Gross Asset Value. Vacancy represents the total floor space in existing properties, which are physically vacant, ready for occupation in the next three months (this period covers fit-out time) and being actively marketed at the survey date. Vacancy includes sublet space (except in Germany), but where possible, vacant sublet space is recorded separately. In France, vacancy excludes premises which the owner will renovate only once a lease is signed. Spain only counts immediately available space. Vacancy Rate represents the total vacant floor space including sub-lettings divided by the total stock at the survey date. 1 Pan-European Property Common Interest Group. This group assembles a wide range of European advisors and investors and major agents. 2 European Association for Investors in Non-listed Real Estate Vehicles. BNP Paribas Real Estate Disclaimer clause BNP Paribas Real Estate cannot be held responsible if, despite its best efforts, the information contained in the present report turns out to be inaccurate or incomplete. This report is released by BNP Paribas Real Estate and the information in it is dedicated to the exclusive use of its clients. The report and the information contained in it may not be copied or reproduced without prior permission from BNP Paribas Real Estate. 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Hong Kong ESTATE P PARIB IBAS REAL ESTATE TE AS R Singapore MAIN LOCATIONS ABU DHABI Al Bateen Area Plot n 144, W-11 New Al Bateen Municipality Street n 32 P.O. Box 2742 Abu Dhabi Tel.: +971 44 248 277 Fax: +971 44 257 817 BELGIUM Boulevard Louis Schmidtlaan 2 B3 14 Brussels Tel.: +32 2 29 59 59 Fax: +32 2 29 59 69 CZECH REPUBLIC Pobřežní 3 186 Prague 8 Tel.: +42 224 835 Fax: +42 222 323 723 REAL ESTATE P PARIBAS RE DUBAI Emaar Square Building n 1, 7th Floor P.O. Box 7233, Dubaï Tel.: +971 44 248 277 Fax: +971 44 257 817 FRANCE Headquarters 167, Quai de la Bataille de Stalingrad 92867 Issy-les-Moulineaux Tel.: +33 1 55 65 2 4 Fax: +33 1 55 65 2 GERMANY Goetheplatz 4 6311 Frankfurt Tel.: +49 69 2 98 99 Fax: +49 69 2 92 91 4 HONG KONG 63 /F Two international finance Center - 8 Finance Street Hong Kong Tel.: +852 299 286 Fax: +852 2865 2523 HUNGARY Alkotás u. 53. H-1123 Budapest, Tel.: +36 1 487 551 Fax: +36 1 487 5542 IRELAND 2 Merrion Road, Dublin 4 Tel.: +353 1 66 11 233 Fax: +353 1 67 89 981 ITALY Via Carlo Bo, 11 2143 Milan Tel.: +39 2 58 33 141 Fax: +39 2 376 929 JERSEY 3 Floor, Dialogue House 2-6 Anley Street St Helier, Jersey JE4 8RD Tel.: +44 ()1 534 629 1 Fax: +44 ()1 534 629 11 LUXEMBOURG Axento Building Avenue J.F. Kennedy 44 1855 Luxembourg Tel.: +352 34 94 84 Fax: +352 34 94 73 Investment Management Tel.: +352 26 26 6 6 Fax: +352 26 26 6 26 NETHERLANDS JJ Viottastraat 33 171 JP Amsterdam Tel.: +31 2 35 97 2 POLAND Al. Jana Pawła II 25-854 Warsaw Tel.: +48 22 653 44 Fax: +48 22 653 44 1 ROMANIA Union International Center 11 Ion Campineanu Street 6th floor, 1st district Bucharest 131 Tel.: +4 21 312 7 Fax: +4 21 312 71 SINGAPORE 1 Collyer Quay, #31-1 Ocean Financial Centre Singapore 49315 Tel.: +65 62 1 12 88 DID: +65 62 1 31 99 SPAIN María de Molina, 54 286 Madrid Tel.: +34 91 454 96 Fax: +34 91 454 97 65 UNITED KINGDOM 5 Aldermanbury Square London EC2V 8HR Tel.: +44 2 7338 4 Fax: +44 2 743 2628 ALLIANCES BNP P AUSTRIA CYPRUS ESTONIA FINLAND GREECE INDIA LATVIA LITHUANIA NORTHERN IRELAND PLEASE CONTACT NORWAY RUSSIA SERBIA SWEDEN SWITZERLAND TURKEY UKRAINE USA Alliances Bernard Blanco Tel.: +33 ()1 47 59 2 84 bernard.blanco@bnpparibas.com Research Christophe Pineau Tel.: +33 ()1 47 59 24 77 christophe.pineau@bnpparibas.com Document non contractuel - Departement Research - October 213 BNP Paribas Real Estate: Simplified joint stock company with capital of 329,196,68-692 12 18 RCS Nanterre - Code NAF 411B CE identification number FR 666 92 121 8 - Headquarters: 167, Quai de la Bataille de Stalingrad - 92867 Issy Les Moulineaux Cedex BNP Paribas Real Estate is part of the BNP Paribas Banking Group BNP Paribas Real Estate is part of the BNP Paribas Banking Group E P PARIBAS REAL EST ARIBAS REAL ESTATE A BAS REAL ESTATE