jones lang lasalle 2013 global real estate outlook

Global Real Estate Outlook Jeremy Kelly Global Research David Green-Morgan Global Capital Markets Research Ben Breslau Director of Research, Americas 7th February 2013

Global

Global Real Estate Outlook – Road Map

Global Markets: Current Position

2

Global Markets: 2013 Outlook

Leasing Markets: Review and Outlook • Offices – prices, demand, vacancy, construction • Retail, Logistics

Investment Market: Review and Outlook • Transactional activity • Where did the money come from and go to? • Weight of capital and pricing • Real estate within global capital markets

Global Markets – Current Position

• Optimism returns, momentum gathers pace • Exceptional end to 2012 • Investment and leasing markets continue to diverge …

3

Leasing – Less Resilient • Leasing volumes down 20% on 2011 • Rental growth at 1.5% y-o-y • Vacancies edge downwards – 13.2%

Investment – Confidence Returns • Better than expected 2012 - US$443 billion in transactions • Major risks receding, debt improving selectively • Yields in secondary attracting attention

Leasing markets: review and outlook

4

Jeremy Kelly Director - Global Research

Shanghai, Beijing, Paris Amsterdam, Warsaw

Washington DC Madrid Seoul

Brussels, Dubai, Frankfurt, Chicago

Los Angeles, Mexico City, Tokyo

New York, Mumbai, Delhi, Johannesburg, Istanbul

London

Abu Dhabi

Moscow

Munich, Houston

Berlin

Stockholm, Sao Paulo

Rental Growth Slowing

Rents Falling

Rental Growth Accelerating

Rents Bottoming Out

Milan, Zurich

Hong Kong, Singapore

Toronto

Global Office Property Clock Q4 2012

This data is based on material/sources that we believe to be reliable. While every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. Neither Jones Lang LaSalle nor any of its affiliates accept any liability or responsibility for the accuracy or completeness of the information contained herein

Source: Jones Lang LaSalle IP, January 2013

Boston

Dallas

San Francisco, Sydney

Office leasing

5

Americas Asia Pacific EMEA

Global Office Index – Rental growth stalls

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Americas Europe

Asia Pacific Global

Renta

l Cha

nge (

% Q

oQ)

Asia Pacific – stock weighted average of 27 markets; Americas – stock weighted average of 39 markets: Europe – stock weighted average of 24 markets Global Index based on GDP weighted average of the three regional indices Source: Jones Lang LaSalle, January 2013

Office leasing

6

Office leasing volumes subdued

7

Office leasing

Flat

Europe Asia Pacific US Global

2012

2013

-10%

-30%

+0-5% -5-10%

…but momentum building in H2 2013

-20%

+0-5%

-20%

0

5

10

15

20

25To

ronto

Mexic

o City

New

York

San F

ranc

isco

Bosto

n

Sao P

aulo

Was

hingto

n DC

Los A

ngele

s

Chica

go

Lond

on

Paris

Stoc

kholm

Brus

sels

Fran

kfurt

Madr

id

Mosc

ow

Hong

Kon

g

Toky

o CBD

Beijin

g

Sing

apor

e

Sydn

ey

Shan

ghai

Mumb

ai

Office vacancy rates edge downwards

Source: Jones Lang LaSalle, January 2013

Europe 9.6% Asia Pacific 11.0%

Regional vacancy rates based on 49 markets in the Americas, 24 markets in Europe and 24 markets in Asia Pacific. Covers all office sub-markets in each city. All grades except Asia and Latin America (Grade A only). Tokyo relates to CBD only.

Americas 16.0% %

8

Q4 2012 movement Increased Decreased

Stable

Office leasing

0

5

10

15

2020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 (F)

2014 (F)

US Europe Asia Pacific

millio

ns sq

m

24 markets in Europe; 25 markets in Asia Pacific; 44 markets in the US. Asia relates to Grade A only. Source: Jones Lang LaSalle, January 2013

Global Office Development – deliveries below trend

Average

Office leasing

9

0 5 10 15 20 25 30 35 40

ChicagoLos Angeles

MadridSydneyToronto

New YorkSan Francisco

BostonWashington DC

StockholmBrussels

Hong KongFrankfurt

ParisSingapore

LondonBeijing

Tokyo CBDMoscowMumbai

Mexico CityDubai

Sao PauloShanghai

Completions as % of existing stock

Source: Jones Lang LaSalle, January 2013. Covers all office sub-markets in each city. Tokyo - CBD-3 kus

2013

2014

Office Supply Pipeline – Markets diverge Office leasing

10

Prime Offices – Projected Changes in Values, 2013

Provisional. *New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency. Source: Jones Lang LaSalle, January 2013

+ 10-20%

+ 5-10%

+ 0-5%

- 0-5%

- 5-10%

Hong Kong, Tokyo, London*

Beijing, Shanghai, Singapore, Sydney, Mumbai Boston, Chicago, Los Angeles, New York* Toronto, Washington DC, Paris* Frankfurt, Stockholm, Brussels, Moscow, Dubai

Hong Kong, Tokyo, Sydney Moscow, London*

Beijing, Shanghai, Singapore, Mumbai Boston, Chicago, Los Angeles, New York* Toronto, Washington DC Frankfurt, Brussels, Dubai

Madrid

Paris*, Stockholm Sao Paulo, Mexico City

Madrid

San Francisco

Sao Paulo, Mexico City

San Francisco

Capital Values Rental Values

Office leasing

11

Global Retail Market Dynamics


Americas EMEA Asia Pacific

Q4 2012 Rent Clock

United States • Overall market still to find cyclical trough • Malls show tightest conditions • Key gateway markets starting to turn corner

e.g. New York, San Francisco, Houston, Miami

Asia Pacific • Demand is healthy despite more subdued

retail sales • Upswing in rents in 2013, albeit moderately • Retailers becoming more selective in China

Europe • Turkey and Russia are the stand out markets • Cross-border retailers targeting prime pitches • Retailers under pressure to restructure • Robust rental growth in 2013 in key markets

(e.g. London, Moscow, German cities)

12

Rental Value growth slowing

Rental Values falling

Rental Value growth

accelerating

Rental Values bottoming out

Boston, Sydney

Washington DC Chicago

Houston, Singapore

Delhi Mumbai

Shanghai Beijing

Madrid

Dubai

Paris

Berlin

Moscow, Hong Kong London

Milan, New York City, San Francisco, Tokyo

Retail

Global Industrial Market Dynamics


United States • Markets gaining strength • Memphis, Atlanta and Dallas were the star

performers in Q4, • Return of new construction • Focus on “big-box”

Asia Pacific • Retail sales underpin warehousing demand • Export sector shows renewed buoyancy • Most major markets expect rental growth in

2013

Europe • Demand holding up, above 10y average • Take-up underpinned by supply chain

realignment • Low supply sustaining prime rents in 2013

Q4 2012 Rent Clock


Rental Value growth slowing

Rental Values falling

Rental Value growth accelerating

Rental Values bottoming out

Paris, Madrid Los Angeles

Northern New Jersey/New York

Atlanta

Boston, Dallas Houston, Tokyo

Inland Empire, Chicago

Philadelphia

Frankfurt

Amsterdam

London, Warsaw

Hong Kong

Beijing

Shanghai

Singapore

Sydney

Industrial

Investment markets: review and outlook

14

David Green-Morgan Global Capital Markets Research Director

Year on year growth continues in 2012 Investment

0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US$ bn 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Direct Commercial Real Estate Volumes by Region, 2003-2012

Source: Jones Lang LaSalle

15

Strong final quarter typifies post GFC world Investment

Direct Commercial Real Estate Volumes by Region, Q4 2008-Q4 2012

-60%

8%

-19%

92%

-1%

0% 5% 7%

54%

-12%

10% -2%

11%

-27%

22%

-6%

47%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0

20

40

60

80

100

120

140

160

Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412

US$ bn

AM EMEA AP Total investment (% change q-o-q, RHS)Source: Jones Lang LaSalle


16

Flows increased in 2012 to $136 billion Investment

Inter-Regional Flows, 2012


17

Opportunities in Europe move transactions higher Investment

Net Inter-Regional Flows, 2011,2012


-12 -7 -2 3 8 13 18

Asia Pacific

EMEA

Americas

US$ bn 2012 2011

More product on the market in Europe is the major factor driving inter-regional flows

18

More balanced approach in 2012 Investment

Net Investment by Type, 2011,2012


-55

-45

-35

-25

-15

-5

5

15

25

35

REIT Unlisted Institution Private Government Hotel Owner /Operator

Other Corporate Developers

US$ bn

2011 2012

Western governments starting to dispose of property

19

Lack of product holds retail back in 2012 Investment

Net Investment by Sector, 2011,2012


47%

29%

12%

8%

3% 1%

Office Retail Industrial Hotel Mixed Other

50%

24%

13%

7%

3% 3%

2011 2012

20

Secondary cities starting to see more deals Investment



21

Real estate attracts the cash Investment

Fund Raising by Strategy 2012

Source: Bloomberg

Buyout 43%

Real Estate 13%

Debt 12%

Venture 8%

Secondary 8%

Real Assets 6%

Growth 6%

Fund of Funds 4%

Other 0%

22

-150 -100 -50 0 50 100

TokyoSydney

SingaporeShanghai

MumbaiHong Kong

Beijing

Mexico CitySao Paulo

Washington DCToronto

San FranciscoNew York

Los AngelesChicagoBoston

StockholmParis

MoscowMadrid

LondonFrankfurtBrussels

Q3 2012 - Q4 2012Q4 2011 - Q3 2012

23


Basis point change

Amer

icas

Euro

pe

Asia

Pacif

ic

Investment

More movement in secondary, Prime stagnant Prime Offices Yield Shift

UK led markets lower in 2006, what about 2013? Investment


Source: IPD

-25%

-15%

-5%

5%

15%

25%

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Global Returns All Property UK Returns All Property

24

Capital value growth slowing

25

Prime Offices - Capital Value Clock

Capital value growth

accelerating

Capital values bottoming out

Capital values falling

Tokyo, Brussels

Mumbai

Beijing, Stockholm, Boston

Shanghai, Washington DC, London

Singapore, Amsterdam

Hong Kong

Madrid, Seoul

Los Angeles Houston, Frankfurt

Berlin, Moscow

Paris Milan, New York

Sydney

Dallas

Toronto

Mexico City

Chicago, San Francisco, Sao Paulo

Capital value growth slowing

Capital value growth

accelerating

Capital values bottoming out

Capital values falling

Sao Paulo

Dallas

Mexico City Sydney

Washington DC Toronto

Houston San Francisco

Hong Kong, Singapore, Paris

Mumbai

Tokyo Seoul, Brussels

Milan

Madrid

Frankfurt

Moscow

Berlin Stockholm

New York, Boston, Chicago Los Angeles, Shanghai, Beijing Amsterdam

London

The Jones Lang LaSalle Property Clocks SM

Based on notional capital values for Grade A space in CBD or equivalent. US positions relate to the overall market Americas EMEA Asia Pacific

Q4 2011 Q4 2012

$500 billion in sight for 2013 Investment

Direct Commercial Real Estate Volumes by Region, 2003-2013


0

100

200

300

400

500

600

700

800

Americas EMEA Asia Pacific Global

US$ bn

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (forecast)

26

Global Markets – 2013 Outlook

Investment – Stable, with Upside Potential • 2013 average of US$125 billion transactions/quarter • Prime yields look close to bottom, secondary starting to attract more investor

interest • US looks set for major upside in 2013 if political challenges don’t become a

drag; AP resumes growth on improved global trade; EMEA flat • Major markets & strong secondary to attract majority of deals in 2013

27

Leasing – Slow Start to Year, Momentum Builds H2 • Gross leasing volumes +0-5% • Rent growth +2-3% • New office deliveries +28%, but still 30% below trend • Vacancy edging down below 13% • Star performers - San Francisco, Jakarta

28

David Green-Morgan Jeremy Kelly

Global Capital Markets Research Director [email protected]

Director - Global Research [email protected]

Benjamin Breslau

Head of Americas Research [email protected]

Global Real Estate Outlook Questions and Answers

Our Global Research Platform

29

Global Market Perspective Spotting Real Estate Trends

Global Retail Redefining Retail Investment

Global Office Index Monitoring Performance

Global Capital Flows Tracking Real Estate Investment

World Winning Cities Identifying New Markets

Sustainability Transforming the Property Industry

Transparency Understanding Operating Conditions

Global Research Hub joneslanglasalle.com/Research

30

David Green-Morgan Jeremy Kelly

Global Real Estate Outlook

Thank you

Global Capital Markets Research Director [email protected]

Director - Global Research [email protected]

Benjamin Breslau

Head of Americas Research [email protected]

jones lang lasalle 2013 global real estate outlook

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