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2013 I 1Global Property Market

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Crisis back to Europe

Growth in emerging countries slows down

Global Economy

Global: Key indicator and change from last year2012 saw slower global economic growth than the pre-vious year. Events are still largely dictated by the fallout from the financial crisis that began in 2007. Many Europe-an countries, along with the USA, continue to struggle un-der a huge debt burden. Unfortunately, the problem does not stop at government debt, but has been exacerbated by the continuing inability of banks to put their books in order. Then, this March, after only a brief respite, the spectre of bankruptcy returned to haunt another eurozone country in the shape of the Cyprus crisis. Once again, a bloated, over-indebted banking sector proved to be a major root cause. The recession in southern Europe, France and the United Kingdom and the persistently jittery trends in the US econ-omy have also fed through to the emerging markets, which are suffering a slump in demand.These external factors have been compounded by home-grown problems in the emerging countries, some of which (including China) have been hit by diminishing investment demand, funding bottlenecks in certain industrial sectors and high capacity reserves. At around 2.2%, global GDP growth in 2012 fell short of expectations. GDP is predicted to expand by 3.2% in both 2013 and 2014. Much will hinge on the success of the de-veloped countries in resolving their debt and confidence crisis.

Trends in the real estate markets would seem to run coun-ter to the mood of the global economy. 2012 saw a further year-on-year rise in the volume of transactions, which has reached its highest level since 2007. Sales figures soared, especially in Q4, again in response to the immense capital pressure. Now that various countries have been marked down by the rating agencies, the investment universe of government bonds, particularly for pension funds, has fur-ther narrowed and the remaining investment classes of-fer virtually zero returns. Real estate thus serves as the best substitute. In many cases, however, value gains are achieved solely by lowering return requirements instead of raising rents. This type of value growth is therefore shaky. A clear line can be drawn between those markets that are not yet emerging from their real estate crises, or are do-ing so only slowly – notably the southern European coun-tries, but also the Netherlands and UK – and those posting strong growth, e.g. Australia and Canada.

Transaction volumes on the rise

Marina Bay Financial CentreMeadowhall

Tsuen Wan W StationWorldWide Plaza

Amazon HQSony City Osaki

MetropolisSony Plaza

UetlihofWoodfield Shopping Center

Global Real Estate

Global property indices (01/2006 = 100)

Top 10 transactions in the last 6 months Type Rentable area (sqm) Price (EUR) Price (EUR/sqm) Location Buyer

Office 125,415 2,176,000,000 17,350 Singapore, SG DBS Bank

Retail 139,350 1,918,000,000 13,764 Sheffield, UK Norges Bank Invt Mgmt

Dev Site 42,870 1,010,000,000 23,560 Hong Kong, HK Cheung Kong Holdings

Office 148,317 1,007,000,000 6,790 New York, US Hyundai Asset Management

Office 167,394 890,000,000 5,317 Seattle, US Amazon

Office 124,041 885,000,000 7,135 Tokyo, JP Nippon Building Fund

Retail 82,000 881,000,000 10,744 Moscow, RU Morgan Stanley (MSREF)

Office 79,430 834,000,000 10,500 New York, US Chetrit Group JV Clipper Equity

Office 173,807 829,000,000 4,770 Zurich, CH Norges Bank Invt Mgmt

Retail 204,380 788,000,000 3,856 Schaumburg, US CalPERS JV Miller Capital Advisory

Population (2012) 7,057,000,000 ➚

Population: forecast (2050) 37.5% ➚

GDP growth (2012) 2.0% ➘

GDP: forecast (2013) 4.0% ➚

Inflation, end of period consumer prices (2012) 3.9% ➘

Trade volume of goods and services (2011) 5.8% ➘

Unemployment rate (2012) 9.2% ➘

Employment in services (2011) 43.8% ➘

Employment in agriculture (2011) 34.1% ➚

Employment in industries (2011) 22.1% ➙

Price of gold (y-o-y) * 1,317 EUR (+5%)

Price of platinum (y-o-y) * 1,205 EUR (–6%)

Price of oil (Brent, y-o-y) * 90 EUR (–4%)

Price of oil (WTI, y-o-y) * 76 EUR (–5%)

Price of cotton (y-o-y) * 0,60 EUR (–11%)

Exchange rate USD/EUR * 0,7653 (–4%)

Exchange rate USD/YEN * 92,63 (+18%)

Exchange rate USD/CHF * 0,94 (–2%)

Dow Jones Global Index (y-o-y) * 272 (+11%)

MSCI World Index (y-o-y) * 1,405 (+10%)

* As at 28th February 2013

Divergence between strong and still struggling markets

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2006 2007 2011 2012 20132008 2009 2010

� S&P Global Property (real estate equity)� IPD Global Property Index (direct investment)


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The eurozone has been in continuous recession since mid-2012. The sovereign debt and banking crisis is slowing down economic recovery and unsettling consumers and investors alike. At the same time, despite the persistently weak economic fundamentals there is a growing convic-tion that the crisis has bottomed out and that the eurozone is slowly moving towards recovery. Although the initial “re-blossoming” was abruptly halted several weeks ago with the emergence of the Cyprus crisis, the ECB’s pledge to buy unlimited numbers of bonds from the cash-strapped eurozone states, wherever necessary, has successfully ap-peased the financial markets. All the same, the region is likely to need an extended period of convalescence and many countries face yet another challenging year. The eurozone continues to exhibit a marked divide be-tween the struggling southern nations and northern coun-tries like Germany which are still recording positive (if modest) economic growth.

ECB’s measures pay off …

Western Europe

Office: total return

Focus on core markets

… but convalescene will take time

Revival in Ireland

Office: prime rents (Q3 2009 = 100)The year-end also brought renewed optimism to the real estate market, with a sharp rise in investment volumes – notably in Q4 2012 – that exceeded the expectations of many analysts. Investment activity nonetheless remains dogged by the prevailing economic and political uncertain-ties. These have induced many players to adopt a heav-ily risk-averse position. The main focus is on core markets such as Paris, London and Germany, which account for the lion’s share of investment volumes. The safe havens of the north are also particularly in demand. In Ireland, the incipient revival of investor interest in the market heralds better times ahead. The outlook in the Netherlands, on the other hand, remains decidedly gloomy: in this country, there are too many beleaguered investors sitting on office properties that are virtually impossible to let due to oversupply. Here, 2013 looks certain to bring a further slide in prices. On the income side, practically none of the markets are likely to benefit from any positive stimuli. The demand pressure for investment properties is set to remain the dominant factor.

FinlandSweden

DenmarkUnited Kingdom

GermanyNetherlands

France

LondonParis

FrankfurtStockholm

OsloVienna

Amsterdam

Population Population growth GDP GDP per capita W&P rating JLL transparency Credit rating(in 1,000) (2011–2017) (EUR bn.) (EUR) (1.0–5.0) index (1.0–5.0) (1.0–5.0)

5,401 0.41% 202 33,835 1.1 ➙ 2 ➘ 1.0 ➙

9,450 0.32% 418 38,211 1.1 ➙ 1.9 ➘ 1.0 ➙

5,561 0.39% 255 43,213 1.2 ➘ 1.9 ➘ 1.0 ➙

62,644 0.58% 1,864 27,936 1.3 ➘ 1.4 ➚ 1.3 ➘

81,779 –0.14% 2,765 31,057 1.4 ➘ 1.3 ➙ 1.0 ➙

16,690 0.23% 642 36,044 1.5 ➘ 1.5 ➚ 1.0 ➙

63,128 0.40% 2,130 31,384 1.7 ➘ 1.4 ➘ 1.3 ➘

Population GDP per capita Office: prime rent Retail: prime rent Prime yield Prime yield W&P rating(in 1,000) (EUR) (EUR) (local curr.) (EUR) (local curr.) (office) (retail) (1.0–5.0)

7,775 67,795 1,210 1,050 GBP ➙ 13,000 11,230 GBP ➚ 4.00% ➘ 3.50% ➙ 1.0 ➙

2,186 65,500 790 790 EUR ➚ 9,780 9,780 EUR ➚ 4.60% ➘ 4.25% ➘ 1.3 ➙

659 73,255 432 432 EUR ➙ 3,240 3,240 EUR ➙ 4.90% ➘ 4.50% ➚ 1.6 ➙

826 66,148 535 4,500 SEK ➘ 1,730 14,600 SEK ➙ 4.60% ➘ 4.90% ➘ 1.8 ➙

583 71,905 560 4,200 NOK ➚ 2,550 19,000 NOK ➚ 5.40% ➚ 5.50% ➚ 1.8 ➙

1,698 56,499 290 290 EUR ➙ 3,840 3,840 EUR ➚ 4.80% ➘ 4.30% ➚ 1.9 ➙

756 50,429 350 350 EUR ➙ 2,800 2,800 EUR ➙ 5.90% ➘ 4.30% ➘ 2.0 ➘

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2006 2007 2010 2011 201220092008

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� United Kingdom� Sweden� France� Denmark� Finland� Netherlands� Germany

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� London� Stockholm� Vienna� Oslo� Amsterdam� Paris� Frankfurt


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Russia and Turkey still strong

Eastern / South-Eastern Europe

As real estate market trends largely depend on the macro-economic situation in the individual countries, they inevi-tably mirror the discrepancies within the region. The trend towards investment in larger, more liquid markets partic-ularly favours the established locations of Moscow, War-saw and Istanbul. While the office market is stagnating, business in the prime retail market segment of the CEE countries is picking up as the robust economy and rising incomes attract increasing interest among international retailers. Indeed, the bulk of retail development schemes planned in Europe are located in the CEE countries. None-theless, with the current supply situation in the prime seg-ment still tight, rents in Istanbul and Moscow are moving upwards.The markets in Hungary, Bulgaria and Romania, on the oth-er hand, remain in the doldrums. Here, the oversupply of office and retail premises is both preventing any sustained recovery in rents and holding down real estate prices. But even though the vast majority of the available stock in these countries is virtually unlettable, the few prime prop-erties are commanding greater interest and higher prices.

Retail on the rise, office stagnation

Oversupply as a major problem in some markets

MoscowIstanbulPrague

WarsawBudapest

BucharestZagreb

Czech RepublicPoland

SlovakiaHungary

TurkeyCroatia

Bulgaria


10,530 0.15% 165 14,423 2.2 ➘ 2.7 ➘ 2.0 ➙

38,200 0.07% 394 9,435 2.3 ➘ 3.5 ➘ 2.4 ➘

5,446 0.09% 74 12,304 2.4 ➘ 3.2 ➘ 2.3 ➚

9,986 –0.18% 108 9,847 2.4 ➘ 3.0 ➘ 3.8 ➘

74,724 0.88% 594 7,679 2.8 ➘ 3.0 ➙ 3.4 ➚

4,402 0.00% 48 10,310 2.8 ➘ 2.8 ➘ 3.5 ➘

7,327 –0.48% 41 4,886 2.9 ➘ 3.6 ➙ 3.1 ➘


Office: prime rents (Q3 2009 = 100)

The picture in central, eastern and south-eastern Europe (including Turkey) is generally brighter than in western Eu-rope. Here too, however, the gap between the strong and weak economies continues to widen. Russia and Turkey, with their rapid domestic expansion, were the key growth drivers in this region. Poland, too, continued to fare well by regional standards, despite the gently declining growth of the past half-year.By contrast, other countries such as Hungary, the Czech Republic, Slovenia and Greece have to contend with var-ious degrees of recession and high unemployment. Giv-en that the performance of the CEE countries is closely tied to developments in western Europe – due to the close trade relations between the two halves of the continent – it is subject to the same political and economic uncertain-ties. The austerity cuts are additionally curbing economic growth.


10,544 19,431 930 1,220 USD ➚ 4,770 6,240 USD ➚ 8.90% ➚ 9.00% ➘ 2.5 ➚

12,176 14,914 420 550 USD ➚ 2,500 3,270 USD ➚ 7.60% ➘ 8.00% ➚ 2.5 ➙

1,249 29,784 230 230 EUR ➙ 2,120 2,120 EUR ➙ 6.40% ➘ 6.25% ➙ 2.6 ➙

1,710 26,879 310 310 EUR ➙ 1,060 1,060 EUR ➘ 6.30% ➚ 6.30% ➘ 2.7 ➙

1,712 21,416 220 220 EUR ➙ 1,200 1,200 EUR ➚ 7.50% ➚ 7.00% ➙ 2.7 ➚

326 9,548 230 230 EUR ➚ 705 705 EUR ➘ 8.50% ➙ 8.90% ➘ 3.3 ➙

789 23,546 170 170 EUR ➘ 960 960 EUR ➚ 8.50% ➚ 7.60% ➘ 3.5 ➚

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2006 2007 2010 2011 201220092008

� Eastern Europe� Poland� Czech Republic

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� Moscow� Warsaw� Budapest� Bucharest� Prague� Zagreb� Istanbul

EU members still struggling


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The US economy continues to battle with the deep-rooted problems of the sub-prime crisis that struck six years ago, with per-capita income and employment rates still below pre-crisis levels. The bright prospects of the first half of 2012 fizzled out in the second half. First signs of hope are now emerging from the battered re-al estate sector and further support is also likely to come from the US Administration, which, through the Federal Reserve’s quantitative easing measures, is continuing to buy up mortgage-backed securities until the long-term em-ployment situation has stabilized. The GDP growth predicted for the USA in 2013 runs to on-ly 1.7%, a figure below the already meagre expectations of 2.1% for 2012. The short-term outlook may deteriorate still further, should the eurozone crisis intensify and the pro-jected US budget reductions be implemented.

Disillusion towards the end of last year

North America

US budget reduction plans threaten GDP growth

Rising demand for quality space in US

The US real estate sector remains on a slow path to recovery. The renewed growth in 2012 looks set to continue this year in all segments of the property market. Despite the relative-ly low job creation levels, a rise in demand was recorded for new office, retail and industrial space. This is an after-effect of the post-2007 collapse in development activity. Demand in the residential sector is similarly brisk despite increased production in the resurgent housebuilding industry. While high government debt and fears of recession over-shadow most of the world’s economies, the situation in Canada remains comparatively stable. Indeed, in IPD’s performance analysis for 2012, Canadian cities achieved by far the best ratings. Canada scores through its econom-ic stability and high quality of life while offering an envi-ronment that combines the best features of Europe, the USA and, increasingly, Asia. Even so, the keen interest of investors in this relatively small market also poses risks: the flurry of record deals is squeezing returns and Cana-da’s high earnings potential – which is the key to its pulling power – is progressively waning. There is a risk that, soon-er or later, investors may simply move on to new pastures.

USACanada



Canadian cities with highest capital growth worldwide

New YorkChicagoToronto

WashingtonMontrealHoustonAtlanta


311,946 0.81% 11,557 35,885 1.1 ➙ 1.8 ➚ 1.1 ➚

34,437 1.04% 1,333 35,480 1.1 ➘ 1.8 ➘ 1.0 ➙


8,364 67,763 620 810 USD ➚ 21,900 28,650 USD ➚ 4.70% ➘ 4.00% ➘ 1.1 ➙

2,853 56,854 320 420 USD ➚ 3,900 5,100 USD ➘ 6.60% ➚ 5.20% ➘ 1.7 ➚

2,503 47,826 295 395 CAD ➚ 2,680 3,590 CAD ➚ 4.80% ➘ 4.80% ➘ 1.8 ➙

592 70,476 420 550 USD ➘ 1,540 2,010 USD ➚ 5.90% ➚ 5.50% ➘ 1.8 ➙

1,621 39,654 245 330 CAD ➘ 1,560 2,090 CAD ➘ 6.00% ➚ 5.80% ➚ 2.0 ➙

2,242 59,578 320 420 USD ➚ 310 400 USD ➘ 6.50% ➙ 6.10% ➚ 2.0 ➙

538 48,390 200 260 USD ➙ 410 540 USD ➘ 7.80% ➚ 6.00% ➘ 2.0 ➚

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2006 2007 2010 2011 201220092008

� USA� Canada

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� Chicago� Washington� Toronto� Atlanta� Montreal� New York� Houston


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Latin America

Office: cap rates


Latin America is not immune to the global economic slow-down and its growth figures, though still above par by in-ternational standards, have now dropped to a moderate level. The relatively stable regional economy benefits from positive macro-economic factors such as falling inflation, higher exchange rate stability, budget surpluses and low government debt. As a focal point of international com-merce and investment, Latin America has managed to weather the eurozone crisis and faltering growth in China.While Mexico’s economic expansion has shown hardly any signs of flagging, Brazil has experienced a slight downtrend with low growth rates. The Brazilian economy did, however, stage something of a rally in the last quarter of 2012. Significant growth is forecast for 2013, particularly in Chile with a projected 5%. A growth rate of about 3.4% is predict-ed for Brazil and 3.3% for Mexico.

Stable growth despite international challenges

Brazil is now gradually establishing itself as the continent’s preferred investment location, alongside Chile. Given the country’s only limited supply of prime-segment properties, rents in São Paulo are skyrocketing. Not only in this city but also in Santiago, vacancy rates remain at a historic low. The 2014 World Cup and 2016 Olympic Games, both to be hosted by Brazil, look set to give a further shot in the arm to domestic property and infrastructure developments. At the same time, speculative construction schemes seem likely to push up vacancy rates gently in the short term. In Buenos Aires, the office market has remained astonishing-ly stable despite the prevailing economic volatility.The gradual emergence of a more substantial middle class in Latin America has triggered a rise in consumer spend-ing and induced many international retailers to expand their operations in the region. This, in turn, is fuelling the demand for prime retail properties and pushing up rents across the segment. The returns achieved at most loca-tions are still comparatively high, at least for foreign inves-tors unaffected by local inflation.

Demand for quality retail space

Vacancy rates in São Paulo and Santiago at historic low

Mexico CitySantiago

São PauloRio de Janeiro

Buenos AiresLima

Panama City

ChileMexico

PeruBrazil

UruguayColombia

Costa Rica


17,248 0.74% 190 9,690 2.0 ➘ 2.8 ➘ 1.4 ➚

113,735 0.88% 885 7,067 2.6 ➘ 3.3 ➙ 2.8 ➘

30,009 1.38% 136 3,992 2.8 ➘ 3.8 ➘ 2.9 ➘

194,933 0.70% 1,911 8,501 2.8 ➘ 3.4 ➘ 2.8 ➘

3,369 0.30% 36 9,001 2.8 ➙ 3.0 ➘ 3.0 ➚

46,052 1.05% 251 4,799 2.9 ➘ 3.9 ➘ 2.9 ➘

4,614 0.98% 31 6,086 3.1 ➙ 3.5 ➚ 3.3 ➚


8,842 19,396 290 380 USD ➚ 580 760 USD ➚ 9.00% ➘ 9.50% ➙ 2.7 ➘

5,197 12,484 280 175,000 CLP ➚ 490 300,060 CLP ➘ 8.50% ➘ 9.00% ➙ 2.7 ➙

11,038 13,946 800 2,080 BRL ➚ 1,460 3,790 BRL ➚ 10.00% ➚ 9.00% ➚ 2.8 ➙

6,187 11,589 850 2,200 BRL ➚ 1,360 3,520 BRL ➚ 10.30% ➚ 9.50% ➚ 3.1 ➙

3,043 13,712 270 350 USD ➘ 1,020 1,340 USD ➚ 9.00% ➘ 10.00% ➙ 3.2 ➘

8,000 6,017 220 288 USD ➚ 620 810 USD ➚ 12.50% ➚ 12.00% ➙ 3.2 ➙

825 6,957 300 380 PAB ➚ 310 400 PAB ➚ 9.50% ➚ 9.00% ➚ 3.7 ➘

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2010 201220112009

� South America

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� Rio de Janeiro� São Paolo� Santiago de Chile� Lima� Panama City� Buenos Aires� Mexico City

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� Hong Kong� Shanghai� Singapore� Mumbai� Seoul� Tokyo� Kuala Lumpur


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Asia

Hong KongSingapore

TokyoSeoul

ShanghaiKuala Lumpur

Mumbai

SingaporeJapan

South KoreaMalaysia

TaiwanChinaIndia



The Asia-Pacific region continues to lead global economic growth, even though the 2012 growth rate of 5% was mod-est compared to previous years. Europe’s sovereign debt crisis and the persistent uncertainty in the USA are drag-ging down the performance of the Asian markets, which are heavily reliant on exports and foreign investment.The previous year’s fears of a possible hard landing in Chi-na were largely allayed in Q4 2012, in the wake of surpris-ingly positive results. At the same time, 2012 saw India post the lowest economic growth since the darkest days of the global financial crisis. The Japanese economy contin-ued its slide and even costly stimulus packages helped to achieve little more than minimal expansion. On the other hand, the countries of Southeast Asia, including Indonesia and the Philippines, have continued to record exceptionally high growth rates.

Asia remains growth center

Southeast Asia records growth rates

The real estate markets in Asia exhibit divergent trends. While office rents in Beijing surged in 2012 (albeit with a trend reversal in Q4) and niche locations such as Jakarta posted record increases, regional markets such as Tokyo, Shanghai, Singapore and the Indian cities witnessed stag-nating or dwindling rents. In Singapore and Hong Kong in particular, there is no end in sight to the deterioration in rents.The retail sector, by contrast, has continued to boom. Not only in China, but in other countries too, the rising demand among international retailers has translated into higher rents.Despite its recent difficulties, Japan, as an established lo-cation, remains a favourite among investors. Indeed, the focus in 2012 was firmly on established locations, with the emerging markets accounting for only two of the top 30 preferred sites worldwide (with Shanghai ranked 22 and Beijing 30). The remaining locations are in Europe, Amer-ica and the established Asian markets, e.g. Tokyo, Singa-pore and Seoul.

Most important markets shows stagnating rents


5,274 1.56% 199 33,627 1.0 ➙ 1.2 ➚ 1.0 ➙

127,896 -0.22% 4,497 32,859 1.6 ➘ 1.7 ➚ 1.6 ➙

49,779 0.40% 856 15,746 1.9 ➘ 1.7 ➙ 1.4 ➚

28,553 1.52% 221 6,698 2.0 ➙ 2.4 ➘ 2.3 ➘

23,225 0.79% 358 14,238 2.2 ➙ 1.9 ➙ 1.5 ➘

1,347,350 0.42% 5,595 3,390 2.6 ➘ 3.0 ➘ 1.5 ➚

1,206,917 1.17% 1,400 1,050 3.2 ➘ 3.7 ➘ 3.0 ➚


7,055 20,719 1,200 12,200 HKD ➘ 21,600 219,600 HKD ➚ 2.90% ➘ 2.40% ➘ 1.5 ➘

3,734 31,511 700 1,140 SGD ➘ 3,240 5,250 SGD ➚ 4.00% ➘ 4.00% ➚ 1.6 ➚

12,907 39,937 1,020 122,200 JPY ➘ 6,130 736,420 JPY ➚ 4.30% ➘ 4.10% ➘ 1.7 ➙

10,464 17,543 395 559,700 KRW ➚ 3,650 5,178,660 KRW ➚ 0.00% ➘ 7.00% ➚ 2.3 ➙

18,885 7,253 650 5,360 CNY ➘ 3,070 25,200 CNY ➚ 5.20% ➚ 2.70% ➘ 2.6 ➘

1,475 13,875 320 1,300 MYR ➘ 1,310 5,320 MYR ➚ 0.00% ➘ 6.00% ➙ 2.7 ➙

13,831 3,444 560 39,350 INR ➘ 1,560 110,000 INR ➚ 10.10% ➘ 10.00% ➘ 3.1 ➘

Rising rents for retail spaces throughout Asia

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Australia/New Zealand


After the disastrous floods of 2010 and 2011, Australia bounced back in 2012 as rising exports, higher consumer spending and the expanding population combined to deliv-er 3% growth in GDP. Solid increases of 2.6% and 3.3% are also predicted for 2013 and 2014 respectively. The 5.4% jump in exports in 2012 was mainly due to expanded pro-duction capacity in the mining sector. Still, the next two years are likely to see a fall in export growth to 3.4% and 3.6% respectively. This aside, forecasts for the fifth conti-nent are positive practically across the board and the un-broken 20-year period of economic growth looks set to continue. New Zealand’s Canterbury region was hit by a second se-vere earthquake in 2011. The delayed reconstruction works are only reflected In brisker investment growth in the 2012-2014 period. GDP growth of 2.1% and 2.7% is nonetheless predicted for 2013 and 2014 respectively.

Mining sector pushes GDP growth back to higher levels

New ZealandAustralia

As previously, the second half of 2012 saw Australia main-tain its position as one of the most popular real estate in-vestment locations in the Pacific region. This year too, for-eign investment in Australia has again exceeded that of all other countries of the Pacific. The downside is the coun-try’s persistently wide regional variations in interest in-come. Whereas cities such as Perth and Brisbane are ben-efiting from robust sales of raw materials, other locations such as Sydney have been harder hit by the worldwide re-cession. Overall, despite marked regional differences, New Zea-land’s real estate market continued the steady progress it made in 1H 2012 throughout the second half of the year. Auckland, the country’s main commercial centre, remains the focus of investment. The country’s appeal is further boosted by low mortgage rates and attractive levels of in-terest income. In terms of real estate investment, the pros-pects for both Australia and New Zealand remain positive in 2013. However, given the rising demand from Europe and Asia, it is unclear how long the comparatively high re-turns on property will persist.

Cities with mining links still benefiting

New Zealand attractive due to low mortgage rates and income levels

Total return: office

SydneyMelbourne

BrisbanePerth

AucklandAdelaide


4,416 0.89% 122 24,578 1.0 ➚ 2.3 ➚ 1.2 ➘

22,403 1.11% 1,140 43,005 1.1 ➙ 1.9 ➚ 1.0 ➙


3,750 53,355 585 750 AUD ➙ 8,900 11,410 AUD ➘ 6.80% ➚ 6.00% ➚ 1.7 ➙

3,552 50,008 420 540 AUD ➘ 4,460 5,710 AUD ➘ 7.20% ➚ 5.00% ➚ 2.1 ➙

1,826 45,951 490 630 AUD ➘ 3,430 4,400 AUD ➚ 7.50% ➙ 6.50% ➘ 2.2 ➙

1,318 45,354 670 860 AUD ➚ 3,160 4,050 AUD ➚ 8.10% ➚ 8.00% ➚ 2.2 ➙

405 41,860 210 330 NZD ➚ 1,150 1,830 NZD ➘ 8.40% ➚ 7.80% ➚ 2.2 ➚

1,065 47,250 295 380 AUD ➘ 2,880 3,690 AUD ➚ 7.70% ➘ 6.00% ➙ 2.4 ➘

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8

12

Africa/Middle East

The simmering political conflicts in the Middle East have curbed growth in the region. Although the oil-exporting countries have continued their robust expansion, the eco-nomic woes of the oil-importing countries are deepening. Those Arabian countries locked in a transitional phase in the wake of the Arab Spring remain dogged by political tur-moil and social unrest. Moreover, the unresolved conflict in Syria is breeding risk aversion throughout the region.Many African countries, on the other hand, have managed to buck the global downtrend: the economic upswing wit-nessed by these nations is a product of their closer trade and investment relations with emerging and developing countries, which have mitigated the fallout from the euro crisis. The dynamic growth of oil-exporting countries, the discovery of new oil fields, e.g. in Kenya, and greater eco-nomic diversification have further boosted performance. Growth in South Africa is currently under threat due to do-mestic problems such as high unemployment and increas-ing industrial unrest.

Syrian conflict adumbrates economic development

African countries profit from relations to emerging nations

United Arab EmiratesSaudia Arabia

IsraelSouth Africa

Kuwait

Total return: office


5,375 2.71% 262 41,712 1.9 ➙ 1.5 ➚ 1.6 ➚

28,169 1.88% 458 12,680 2.1 ➘ 2.3 ➘ 1.5 ➙

7,532 1.99% 187 22,645 2.2 ➚ 2.6 ➘ 2.0 ➙

50,590 1.06% 313 5,574 2.4 ➘ 3.3 ➙ 2.8 ➘

3,682 2.56% 123 25,667 2.5 ➘ 3.0 ➘ 1.6 ➙

0%

–10%

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2006 2007 2010 2011 201220092008

� South Africa

ExcellentGoodQuestionablePoorLowestNot rated

Rating of real estate metropoles worldwide

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9

12


DubaiAbu Dhabi

Tel AvivKuwait

Johannesburg

The two main real estate markets in the Gulf region, Dubai and Abu Dhabi, have reached varying stages of develop-ment. The office market in Dubai continues to suffer from an oversupply together with high vacancy rates. At the same time, prime-segment rents have stabilized. As in the retail market, however, the situation is becoming heavily polarized, with a limited prime-segment supply set against a secondary market with falling rents. Abu Dhabi is lagging behind Dubai in the construction cycle and the persistently high level of speculative development is squeezing main-stream rents. Despite rising foreign investment in Africa, only few in-ternational investors are active in the real estate sec-tor. South Africa remains by far the largest and most ad-vanced property market. Yet the increasing diversification in the African economy is buoying up the demand for office space while greater urbanization is boosting the market for consumer goods and increasing the need for retail prop-erties. The rapidly developing Sub-Saharan countries with their expanding cities, e.g. Lagos, Luanda and Nairobi, are likely to be of particular interest to investors.

Speculative development still a problem in the Gulf region

Cities in Sub-Saharan countries are rapidly developing


2,501 51,729 395 1,900 AED ➘ 710 3,420 AED ➚ 8.60% ➘ 8.00% ➘ 2.3 ➙

860 53,550 375 1,800 AED ➘ 590 2,820 AED ➚ 8.75% ➘ 9.50% ➘ 2.5 ➚

393 33,246 275 1,330 ILS ➘ 2,560 12,480 ILS ➚ 7.50% ➙ 7.00% ➙ 2.7 ➚

96 46,838 350 130 KWD ➙ 950 350 KWD ➙ 10.00% ➙ 9.00% ➙ 2.8 ➘

3,790 15,348 195 2,250 ZAR ➘ 480 5,530 ZAR ➚ 8.50% ➘ 8.00% ➙ 2.9 ➘

100

75

125

150

2009 2010 20122011

� Tel Aviv� Johannesburg� Abu Dhabi� Dubai� Kuwait


10

12

This market survey is based on a broad internal data pool. It also draws on data provided by the following internation-al institutions: various statistical offices, United Nations Organisation, International Monetary Fund, International Labour Organisation, Wallstreet Online, World Bank Group, «finance.net», Real Capital Analytics, as well as market re-ports of the following brokers: PriceWaterhouseCoopers, CB Richard Ellis, Jones Lang LaSalle, Knight Frank, NAI Apollo and Cushman & Wakefield. All total return data is supplied by IPD.

Grading system (W&P Rating, JLL Transparency Index and World Bank Ease of Registering Property): Grade 1.0 = ex-cellent, Grade 5.0 = deficient. Prime rents (2012): EUR per square metre and year, local currency per square metre and year. Prime yields (2012): net initial yield (cash flow before capex/price).Population and GDP figures are from 2011. Arrows indicate the year-on-year change (throughout the whole document).This market report was compiled by Wüest & Partner AG and has been prepared with due care. It is intended for general guidance only. The market report is based upon data in our possession or supplied to us. We believe this information to be correct and accurate, but cannot provide any guarantee. Reliance should not be placed upon the in-formation, forecasts and opinions set out herein for any purpose whatsoever, and Wüest & Partner AG accept no liability, whether in negligence or otherwise, arising from such use.

Wüest & Partner is an internationally active consultancy firm for real estate. It focuses on the property and con-struc-tion sectors, urban development and locational trends. Its multidisciplinary team counsels institutional owners, banks and insurers, construction and real estate compa-nies, public authorities and private clients.With a comprehensive range of services, innovative prod-ucts and unrivalled databases, the company develops and, in many cases, helps to implement tailored solutions.Since its foundation in 1985, Wüest & Partner has – not least by virtue of its independence – established an impec-cable reputation for quality. By concentrating exclusively on consultancy services, it can deliver fully professional and at the same time neutral solutions. Staffed with approximately 100 specialists from a varie-ty of fields – including architecture, economics, IT, engi-neering, natural and social sciences – the company has an excellent multi-disciplinary knowledge base on which to build. It also has an unrivalled real estate pool of data on all re-gions and market segments, enabling it to provide in-depth consultancy throughout Switzerland and furnish informa-tion to make the real estate markets more transpar-ent. For specific projects, Wüest & Partner’s team, based in Zu-rich, in Geneva, in Frankfurt and in Berlin can rely on sup-port from a network of international business partners and local experts.Wüest & Partner AG is owned and managed by 15 part-ners, who vouch for the continuity, independence, and sus-taina-ble performance of the company. They are Martin Hofer, Andreas Ammann, Marcel Scherrer, Christoph Zab-orowski, Marco Feusi, Andreas Bleisch, Jan Bärthel, Nabil Aziz, Patrick Schnorf, Mario Grubenmann, Patrik Schmid, Gino Fiorentin, Stefan Meier, Hervé Froidevaux und Ronny Haase.

Sources

Notes

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