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A P R I L 2 018

European Real Estate Market

European Real Estate Market - April 2018

2Duff & Phelps Real Estate Advisory Group

The European Union

M AC R O E C O N O M I C OV E R V I E W

• The stronger cyclical momentum in

Europe and the positive unexpected rise

of global trade are supporting the

European Union (EU) economies

transition from recovery to expansion.

• EU GDP data reported by the

International Monetary Found (IMF)

have grown, and according to European

Commission (EC), EU economies are

estimated to increase from 2.1 to 2.3%

for this year.

• Inflation in the EU reached 1.7% in

2017, and is forecasted to grow in

2018. However, it is expected to slightly

decrease in 2019 (1.8%).

• If short-term economic growth exceed

expectations, in the medium-term, high

global asset prices could be vulnerable

to a re-assessment of risks and

fundamentals.

• The outcome of Brexit negotiations

remains uncertain and geopolitical

tensions/protectionist polices are main

threats for EU economies.

European Union (28) (Billions U.S. Dollars) European Union (28) (% change)

0.0

5000.0

10000.0

15000.0

20000.0

25000.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2014

1.8

2015

2.3

2016

2.0

2017**

2.4

2018**

2.3

2019**

2.0

2020*

1.8

2021*

1.7

2022*

1.7

European Union GDPU.S. Dollars (Billion) (% change)

* IMF forecast

** EC Winter 2018 forecast

Source: Duff & Phelps REAG R&D on IMF European Commission (EC) data

-0.5

0.0

0.5

1.0

1.5

2.5

2022*2021*2020*2019*2018*2017*20162015

2.0

Inflation (average consumer prices, % change)

0.00.2

1.7**1.9** 1.8**

1.9

2.0 2.0

European Union (28) Advanced Economies

* IMF forecast

** EC Winter 2018 forecast

Source: Duff & Phelps REAG R&D on IMF European Commission (EC) data



The European Union

R E G I O N A L C O M P E T I T I V E N E S S• According to the European Commission

(“EC”), regional competitiveness is the

‘ability of a region to offer an attractive

and sustainable environment for firms

and residents to live and work.’

• The tool used for measuring and

assessing the competitiveness at

regional level in the EU is the Regional

Competitiveness Index (RCI).

• The factors which determine RCI are:

Basic dimension (institution,

macroeconomic stability, infrastructure,

health and basic education), Efficiency

dimension (higher education and

lifelong learning, labour market

efficiency and market size) and

Innovation dimension (technological

readiness, business sophistication and

innovation).

• The RCI shows a more polycentric

pattern with strong capital and

metropolitan regions in many parts of

Europe. London and its commuting zone

ranked top in 2016.

• Capital regions tend to be the most

competitive region in their Country, but

there are exceptions. In the

Netherlands, the capital region is

ranked second, while in Italy,

Lombardia, a historically highly

productive region, continues to be the

best. Many other German regions

outperform Berlin, which may be due to

its relatively short history as the capital

of a reunited Germany.

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Other Region (min)Other Region (max)Capital Region

EU Region ranking based on RCI 2016 score (EU28=0)UK

Sweden

Portu

gal

Polan

d

Nethe

rland

s

Italy

Fran

ce

Finlan

d

Spain

Denmar

k

Ger

many

Czech

Rep

ublic

Belgium

Austr

ia

*Equal same rank is assigned to two regions if their score difference (on a 0-100 scale)

is not above 0.1

Source: Duff & Phelps REAG R&D on EU Regional Competitiveness Index 2016

Rank* Country Region name Rank* Country Region name

1 United KingdomLondon and regions covered by its commuting zone

254 Romania Sud-Muntenia

2 United KingdomBerkshire, Buckinghamshire and Oxfordshire

255 Romania Sud-Vest Oltenia

3 Netherlands Utrecht 256 Greece Ionia Nisia

4 Sweden Stockholm 257 Greece Dytiki Ellada

5 United KingdomSurrey, East and West Sussex

258 Greece Peloponnisos

6 Denmark Hovedstaden 258 Bulgaria Severozapaden

7 Luxembourg Luxembourg 258 Greece Sterea Ellada

8 France Île de France 261 GreeceAnatoliki Makedonia, Thraki

9 Germany Oberbayern 262 Romania Sud-Est

10 United KingdomHampshire and Isle of Wight

262 France Guyane

Top 10 and Bottom 10 EU regions

Source: Duff & Phelps REAG R&D on EU Regional Competitiveness Index 2016



The European Union

D I G I TA L E C O N O M Y A N D S O C I E T Y

E-shopping• In the EU 66% of all age groups internet

users ordered good or services online

• In 2016, clothes & sports goods are the

most popular online purchases,

followed by travel/holiday

accommodation, household goods and

tickets for events. Less common were

online purchases of food or groceries

and medicine.

• Looking at e-shopping data using

age-users criteria, it comes to light that

clothes & sports are mainly ordered by

“millennials”(aged 16 to 34 years).

Booking travel and holiday

accommodation online are purchased

by shoppers aged 45 to 64 year (57%).

Finally, the age group of 35 to 44 year

old had the highest share of e-shoppers

who bought household goods online

(52%).

E-sales• According to Eurostat, in 2016, ‘20% of

EU businesses reported that they

conducted e-commerce sales (e-sales)

to consumers, other businesses and/or

public authorities; this is a moderate

increase compared with 15 % in 2010’.

The turnover derived by e-sales

amounted to 16% of the total (11% of

EDI-type sales and 5% of web sales).

• In the EU, in 2016, web sales to other

business (B2B) were 12% and to

consumers (B2C) were 13%. Of the 5

% of total turnover generated by web

sales, 2 % came from B2C sales and 3

% from B2B sales.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Nor

way

Uni

ted

Kin

gdom

Sw

eden

Finl

and

Slo

vaki

aS

love

nia

Rom

ania

Por

tuga

lP

olan

dA

ustri

aN

ethe

rland

sM

alta

Hun

gary

Lith

uani

aLa

tvia

Cyp

rus

Italy

Cro

atia

Fran

ceS

pain

Gre

ece

Irela

ndEs

toni

aG

erm

any

Den

mar

kC

zech

Rep

ublic

Bul

garia

Bel

gium

Enterprises’ total turnoverfrom e-commerce

Enterprises having received ordersvia computer mediated networks

Percentage of Enterprises having received orders via computer mediated networks and related % of turnover from e-commerce (2016)

Average percentage Var % yoy (2017/2016)

0%

10%

20%

30%

40%

50%

60%

Nor

way

Uni

ted

Kin

gdom

Sw

eden

Finl

and

Slo

vaki

aS

love

nia

Rom

ania

Pol

and

Aus

tria

Net

herla

nds

Mal

taH

unga

ryLu

xem

bour

gLi

thua

nia

Latv

iaC

ypru

s

Cro

atia

Italy

Fran

ceS

pain

Gre

ece

Irela

ndE

ston

iaG

erm

any

Den

mar

kC

zech

Rep

ublic

Bul

garia

Bel

gium

-35%-30%-25%-20%-15%-10%-5%0%5%10%15%20%

Average percentage of individuals who ordered goods or services,over the internet, for private use in 2017 and var % yoy

6%

-3%1%

11%

5%4%

8%

16%

2%7%

3%

-28%

-4%-2%

3%1%

6%

15%

7%

1%5%

-4% -2%3% 2%

7%2%

7%

Average %of individuals

var % yoy (2017/2016)

Source: Duff & Phelps REAG R&D on Eurostat

Source: Duff & Phelps REAG R&D on Eurostat



European Office Market

I N V E S T M E N T S VO L U M E• In 2017, the volume of investments in

the office sector increased by 5% on an

annual basis.

• Office still remains the most attractive

sector for investors, with the 43% of

total investments.

• Strong investments were registered in

Spain, Netherland, Italy and Ireland, but

Germany remains the most attractive

country with several deals greater than

10,000 m2.

K E Y D R I V E R S• Management of innovative office space

(smart-working)

• Technology will increase the demand in

the main tech district

• Lack of supply core asset

• Shorter leases

• Efficiency, quality and flexibility

VAC A N CY • On half-yearly basis, vacancy rates

remained stable at 7.7%, compared to

2016 which decreased by 0.7% across

European markets.

• The greatest compressions were

registered in Prague (-3.7%) and

Barcelona (-3%).

Office Total

Investments (€ billion)

0

50

100

150

200

250

300

€ Billion

2013 2014 2015 2016 2017

Source: Duff & Phelps REAG R&D on various sources

0%

14%

12%

10%

8%

6%

4%

2%

-400

-200

-300

0

-100

100

200

Am

ster

dam

Bar

celo

naB

erlin

Birm

ingh

amB

russ

els

Cop

enha

gen

Dub

linD

usse

ldor

fFr

ankf

urt

Ham

burg

Hel

sink

i (C

BD

)Li

sbon

Lond

onLu

xem

bour

gM

adrid

Mila

nM

osco

wM

unic

hO

slo

Par

isP

ragu

eR

ome

St.

Pet

ersb

ourg

Sto

ckho

lmV

ienn

aW

arsa

wZ

uric

h

Vacancy rate (%) YOY var. (bps)

bps

-60

-300

10

-320

-200

-40 -2

0

-110

-230

-20

-20

-150

50

-90

-190

70

-210

100

40

-50

-370

-120

-110

0

-30

-250

-10





P R I M E R E N T S A N D Y I E L D S• In 2017, average prime rents slightly

increased (+3%) and average prime

yields are under compression, reaching

4.2% on annual basis.

• For 2018, this trend of rental growth

and yields compression is expected to

continue.

M A R K E T H I G H L I G H T S :• London: ‘The Brexit effect’ represents a

potential risk for investments, in

particular for those related to relocation.

• Milan: Remained the most dynamic

Italian location. In particular CDB and

Centre sub-markets registered an

important take up increase.

• Barcelona: In line with the Spanish

economic recovery, the take up of the

CBD increased due to national and

international investments.

• Paris: Take up in 2017 increased by 2%

and vacancy rate remained stable. On

the other hand, investments saw an

important decrease compared to the

previous year, mainly due to a lack of

mega-transaction.

• Rents in prime cities in Germany rose

again and are expected to grow in 2018

due to the operator in co-working

spaces

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%European average prime office rents and yields

2013 2014 2015 20172016300320340360380400420440460480

Net prime yields (%) Prime rents (€/sqm/year)

€/sqm/year


0

100

200

300

400

500

600

700

800

900

1,000

0%

2%

4%

6%

8%

10%

12%

Office market

Prime rent 2016 (€/sqm/year)


Net prime yield (%)

Vien

naW

arsa

w

Sto

ckho

lmR

ome

Pra

gue

Par

isO

slo

Mun

ich

Mos

cow

Mila

nM

anch

este

rM

adrid

Luxe

mbo

urg

Lond

onLi

sbon

Hel

sink

iH

ambu

rgG

lasg

owFr

ankf

urt

Edin

burg

hD

usse

ldor

fD

ublin

Cop

enha

gen

Bru

ssel

les

Birm

ingh

amB

erlin

Bar

celo

naA

mst

erda

m

€/sqm/year





© d

-map

s.co

m500 km

300 mi

Moscow622

10.3%

Stockholm645

3.5%

Oslo451

3.7%Edinburgh

4195.4%

Manchester440

4.9%

London852

4.1%

Birmingham426

4.9%

Glasgow382

5.4%

Dublin683

4.1%

Lisbon238

4.6%

Madrid385

3.5%

Barcelona252

3.6%

Paris768

3.2%

Brussels286

4.4%

Amsterdam400

3.8%Dusseldorf

3733.5%

Frankfurt400

3.1%

Munich416

3.5%

Wien410

3.8%

Zurich675

2.7%Milan520

3.6%

Rome403

4.1%

Berlin331

3.4%Prague

2524.7%

Warsaw272

5.3%

Hamburg368

3.1%

Copenhagen304

3.8%

Helsinki336

3.5%

Luxembourg586

4.3%

Legend:Prime rents (€/sqm/year)Prime yields (%)

Source: Duff & Phelps REAG R&D on various data

European Retail Market

European Real Estate Market Study - April 2018


I N V E S T M E N T S VO L U M E• In 2017, the volume of investments in

the retail sector increased by 3% over

the prior year.

• Retail investment represents 22% of the

European ones.

• Investor demand is expected to

experience a strong recovery in 2018.

• Investors are looking for core properties

in the emerging markets.

• In 2018, private consumption will

increase thanks to the higher consumer

confidence and the tourism growth.

K E Y D R I V E R S • Growth of tourism in prime locations

• Population growth

• Digital economy

• Lack of supply in prime location

VAC A N CY • The strong demand in the main Europe-

an markets led to a compression in

vacancy rates that in 2017 reached

4.7%.


Retail Total

€ Billion

0

50

100

150

200

250

300

20172016201520142013


High Street yieldsHigh Street rents

Shopping centre yieldsShopping centre rents

European Average prime retail rents and yieldsyields

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%rents

0

50

100

150

200

250

201720162015201420132012





P R I M E R E N T S A N D Y I E L D S• In 2017, average prime rents registered

an increase of 1.2% for High Streets

and 1.6% for shopping centers,

respectively.

• Average net prime yields slightly

decreased, reaching 4,1% for the High

Street market and 4.9% for shopping

centers

• Further yields compression in the main

European markets is expected in 2018.

M A R K E T H I G H L I G H T S• UK: Investments are dominated by the

political uncertainties caused by Brexit.

Nonetheless, London remains one of

the most expensive cities.

• Italy: prime rents in the main cities are

growing sustained by tourism. Market is

still dominated by international player.

• Germany: Secondary locations are

taking advantage of the lack of supply in

prime areas. Rents remained stable

compared to 2016.

• France: Demand in Paris remained

resilient thanks to the attractive

environment and the impact of tourists.

On the contrary, demand for secondary

locations is weakening.

• Spain: Growth of tourism and economic

improvements helped to maintain stable

rents and yields for the High street. An

increase in turnover is expected in

2018.

Yield shopping centre

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Rus

sia

Gre

ece

Bul

garia

Rom

ania

Hun

gary

Slo

vaki

a

Irela

nd

Por

tuga

l

Pol

and

Finl

and

Italy

Uni

ted

Kin

gdom

Sw

eden

Spa

in

Cze

ch re

publ

ic

Bel

gium

Aus

tria

Ger

man

y

Nor

way

Fran

ce

Net prime Yield 2016 Net prime Yield 2017


0

5,000

10,000

15,000

20,000

25,000

Bra

tisla

vaB

ucha

rest

Lisb

onW

arsa

wB

irmin

gham

Man

ches

ter

Edim

burg

hS

tock

holm

Bru

ssel

sH

elsi

nki

Osl

oP

ragu

eG

lasg

owM

osco

wC

open

hage

nA

mst

erda

mM

adrid

Bar

celo

naH

ambu

rgB

erlin

Fran

kfur

tVi

enna

Mun

ich

Dub

linZu

rich

Rom

eM

ilan

Lond

onP

aris 0%

2%

4%

6%

8%

10%

12%

14%



Net prime yield (%)2017

€/smq/year High Street Retail market


© d

-map

s.co

m500 km

300 mi

Moscow4,01612.0%

RUS9.5%

Stockholm1,3393.9%

S4.5%

Oslo2,5623.9%

N4.1%

Edinburgh1,6244.4%

UK4.1%

Manchester2,5464.0%

London16,0002.5%

Birmingham1,2984.5%

Glasgow2,5834.0%

Dublin4,7353.5%

IRL4.9%

Lisbon1,4405.0%

P5.5%

Madrid3,1803.2%

E4.3%

IT4.9%

GR8.3%

BG7.4%

RO7.0%

Barcelona3,3403.4%

Paris19,9982.3%

F3.5%

Brussels1,9353.3%

B4.1%

Amsterdam3,0483.0%

Frankfurt3,6603.2%

D4.1%

Munich4,4402.9%

Vienna3,6602.9%A

4.5%

Zurich17,6043.2%

Milan13,0003.0%

Rome12,5002.9%

Berlin4,0653.3%

Prague2,5443.6%

CZ4.7%

Warsaw1,0686.5%

PL5.3%

Bratislava516

7.3%

H5.8%

SK6.0%

Hamburg3,5203.4%

Copenhagen2,8163.0%

Helsinki2,1304.2%

FIN4.4%

Bucharest564

7.5%





Legend:High Street prime rents (€/sqm/year)High Street Net prime yields (%)Shopping Centre net prime yield (%)

European Logistics Market



I N V E S T M E N T S VO L U M E• In 2017, the volume of industrial

investments increased by 54% on an

annual basis.

• The Industrial sector was the most

attractive commercial real estate market

in terms of investments.

• Industrial investments absorbed 15% of

the total. Investments in this sector

doubled compared to 2016.

• UK registered the highest volume of

investment.

K E Y D R I V E R S• Warehouse spaces

• Drones

• High quality greenfield and brownfield

required

• Build-to-suit developments

• Well-connected assets

• Digital economy

VAC A N CY • Vacancy rates continued to decline in

most of the major markets, reaching the

lowest level in the past five years

Industrial and logistics Total


0

50

100

150

200

250

300

€ Billion

2013 2014 2015 2016 2017


Germany24%

France12%

Nordic countries12%

UK32%

Italy3%

Other countries3%

Netherlands8%

Poland3%

Spain3%

Investments by country





P R I M E R E N T S A N D Y I E L D S• In 2017, rents remained stable in most

countries.

• Average net prime yields remained

stable at 6%.

• In 2018, yield compression and rental

growth is expected for the main markets

due to the lack of investment products.

M A R K E T H I G H L I G H T S• UK: Despite the low yields, e-commerce

and positive rental growth continue to

attract the investors.

• Italy: 2017 registered a record in terms

of annual volume. Demand is dominated

by built-to-suite projects.

• Germany: Strong demand for quality

space and the lack of land increased

the speculative construction

• France: Rents and yields are stabilizing.

Supply is increasing in secondary

regions.

• Spain: 2017 ended with a take up above

the average of last year, but it was not

recorded levels of 2016. Rents are

expected to grow, while yields will see a

slight compression.

• Netherlands: The positive economic

development impacted the

transportation sector, which saw a

sharp growth of new logistics buildings.

0

20

40

60

80

100

120

140

160

180

War

saw

Wie

nS

tock

holm

St.

Pet

erbo

urg

Rom

eP

ragu

eP

aris

Osl

oM

unic

hM

osco

wM

ilan

Man

ches

ter

Mad

ridLo

ndon

Lisb

onH

elsi

nki

Ham

burg

Gla

sgow

Fran

kfur

tEd

inbu

rgh

Dus

seld

orf

Dub

linC

open

hage

nB

russ

eles

Birm

ingh

amB

erlin

Bar

celo

naA

mst

erda

m

0%

2%

4%

6%

8%

10%

12%

14%

Logistics market



Net prime yield (%)

€/sqm/year %


0.0%

2.0%

1.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

European average prime logistics rents and yields

2013 2014 2015 20172016

Net prime yields (%) Prime rents (€/sqm/year)

€/sqm/year

0102030405060708090


© d

-map

s.co

m500 km

300 mi

Moscow58

12.1%

Stockholm96

5.4%

Oslo123

5.0%Edinburgh

856.0%

Manchester78

5.0%

London167

4.3%

Birmingham80

4.9%

Glasgow87

6.3%

Dublin88

5.4%

Lisbon45

7.1%

Madrid65

5.9%

Barcelona76

5.9%

Paris57

5.0%

Brussels56

6.0%

Amsterdam65

5.5%Dusseldorf

664.6%

Frankfurt74

4.6%Munich

814.6%

Vienna64

5.9%Milan

536.0%

Rome54

6.3%

Berlin60

4.6%Prague

516.0%

Warsaw57

6.3%

Hamburg68

4.6%

Copenhagen75

6.2%

Helsinki116

6.0%St. Petersburg

5612.8%




Legend:Prime rents (€/sqm/year)Net prime yields (%)


Duff & Phelps Real Estate Advisory Group

R&D Dept. Italy

+39 039 6423876

[email protected]

www.duffandphelps.it

www.duffandphelps.com

C O N TAC T

The information presented in this report has been obtained with the greatest of care from sources believed to be reliable, but is not guaranteed to be complete, accurate or timely. Duff & Phelps, LLC expressly disclaims any liability, of any type, including direct, indirect, incidental, special or consequential damages, arising from or relating to the use of this material or any errors or omissions that may be contained herein.

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european real estate market...european real estate market - april 2018 duff & phelps real estate...

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