tuesday 12th september 2017 global real estate trends ......5 year forecast. difference....

© Copyright 2017 by K&L Gates LLP. All rights reserved.

Sabina Kalyan, Global Chief Economist and Head of EMEA Strategy & Market, CBRE Global Investors James Green, Partner, K&L Gates LLP, London Gaimin Nonyane, Head of Economic Research, Ecobank Adri Kerciku, Investment Consultant, M3 Capital Partners (UK) LLP Mike Phillips, UK Editor, Bisnow Nathalie Villette, Group Head, Global Corporates, Ecobank

Global Real Estate Trends, Africa and Opportunities for 2017/2018

Tuesday 12th September 2017

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 1

PRESENTED TO:

REAL ESTATE OUTLOOK SEPTEMBER 2017

CONFIDENTIAL AND PROPRIETARY


THE GDP FORECASTS ARE BENIGN, IF BECOMING LATE CYCLE

The Eurozone is lagging the US and UK and will thus outperform over the medium term

-1

0

1

2

3

4

5

6

7

Eurozone Japan UK Australia Singapore Hong Kong Canada USA China

GDP Forecasts Compared To The Estimated Trend Rate Of Growth, %. Source: Oxford Economic Forecasting,.

Estimated Trend Rate 5 Year Forecast Difference


WITHIN EMEA, THE GDP THE RANKING MAY SURPRISE YOU

With the exceptions of the UK and Norway, the forecasts are weaker as we move later cycle

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

GDP Forecasts, % Y/Y Average 2017-2021 and 2018-2022. Source: Oxford Economic Forecasting,.

2017-2021 2018-2022 Difference


WITH INFLATION WEAK, MONETARY POLICY WILL TIGHTEN SLOWLY

The Eurozone and Japan will have the most accommodative monetary conditions

-1

0

1

2

3

4

5

6

7

8

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Central Bank Policy Rates, %. Source: Oxford Economic Forecasting.

USA

Australia

Canada

UK

Eurozone

Japan

0.0

0.5

1.0

1.5

2.0

2.5

Consumer Price Inflation, % Y/Y, Average, 2017-2021.

Source: Oxford Economic Forecasting,.


GLOBAL INVESTMENT VOLUMES ARE FALLING BUT REMAIN HISTORICALLY HIGH

London in particular has been propped up by Asian capital

0

50

100

150

200

250

300

07 08 09 10 11 12 13 14 15 16 17

Global Transaction Volumes, USD Billions.

Source: Real Capital Analytics.

EMEA Americas Asia Pac

0%

10%

20%

30%

40%

50%

60%

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Sources of Cross Border Capital, 12 M Rolling, % Of Total. Source: Real Capital Analytics.

Asia-Pacific Europe North America


LONDON HAS LOST ITS #2 SPOT AND THE GERMAN METROS ARE CLIMBING FAST

Paris has been impacted (temporarily?) by the elections, San Francisco by pricing

0

5

10

15

20

25

Global Transaction Volumes, USD Billions, H1 17. Source: Real Capital Analytics.

Asia Pac

Americas

EMEA


WITH PRICING HOT, LOGISTICS AND NICHE SECTORS HAVE INCREASED VOLUMES

These are global trends, but particularly pronounced in EMEA

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Office Retail Industrial Other

Sector Shares In Investment, % Of Total.

Source: CBRE.

H1 17 Average since 2006

-80

-60

-40

-20

0

20

40

60

80

100

08 09 10 11 12 13 14 15 16 17

EMEA Investment Volumes, % Y/Y, 1 Year Moving Average. Source: CBRE.

Office Retail Industrial Other

The Industrial number spikes because Blackstone sold its European industrial arm “Logicor” to CIC for around EUR 12.2 bn and Hansteen sold a German/Dutch portfolio of EUR1.3 bn to Blackstone/M7.


PRIME YIELDS ARE AT RECORD LOWS BUT STILL OFFER VALUE RELATIVE TO BONDS

Capital values per square metre are also attractive in many markets

3

4

5

6

7

8

9

10

86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

EU-15 Prime Valuation Yields, %. Source: CBRE.

Industrial OfficeRetail Industrial trend

-600

-400

-200

0

200

400

600

800

86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

EU-15 Income Premia Over Sovereign Bonds, Basis Points. Sources: CBRE &

Thomson Reuters.

Industrial Office Retail


A KEY QUESTION IS WHETHER UK CITIES ARE NOW ATTRACTIVE RELATIVE TO CE

Yield compression remains strong in German cities and Madrid and Milan

-200

-150

-100

-50

0

50

100

150

200Prime Office Yields In Q2 17 Compared To Previous Cyclical Trough, Basis Points.

Source: CBRE.


PRIME RENTS ARE RECOVERING BUT SECONDARY IS STILL LAGGING

There is a wide gap between prime and secondary retail in particular

50

100

150

200

250

300

86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

EU-15 Prime Real Rent Indices, 1986=100.

Source: CBRE.

Industrial OfficeRetail Industrial trend

-20

-15

-10

-5

0

5

10

15

20

25

86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

EU-15 Prime Real Rent Indices, 1986=100.

Source: CBRE.

Industrial Office Retail


Dominant, Experiential Retail Venues

Niche residential and under-supplied markets

EMEA: PREFERRED INVESTMENT THEMES

Office Recovery and Evolution State-of-the-Art Distribution Centers

European

Preferred

Investment

Themes

Shortage of modern space in city centres combined with strong demand from media and tech companies in emerging locations

Preferred Markets

Amsterdam South Axis Berlin Stockholm & Oslo Madrid & Barcelona For higher risk-adjusted return investors

– Budapest

Shortage of modern facilities and strong demand driven by e-commerce

Preferred Markets

Major NW European markets Warsaw and Czech Rep Barcelona, Madrid, Milan

Retailers are concentrating their presence in dominant retail locations/formats

Preferred Markets

Central London & Paris high street retail NW European dominant shopping centres

with asset management potential Southern Europe for yield compression & rent

growth

Demographic trends combined with shortage of supply for Independent/assisted living facilities and student accommodation

Preferred Markets

Student housing in NW Europe Senior living in the UK Dutch social housing given regulatory

change

www.cbreglobalinvestors.com

The information in this document is confidential and meant for use only by the intended recipient. This material is intended for informational purposes only, does not constitute investment advice, or a recommendation, or an offer or solicitation, and is not the basis for any contract to purchase or sell any security, property or other instrument, or for CBRE Global Investors to enter into or arrange any type of transaction. This information is the sole property of CBRE Global Investors and its affiliates. Acceptance and/or use of any of the information contained in this document indicates the recipient’s agreement not to disclose any of the information contained herein.


Africa – an Introduction

James Green

The “real” world map

Source: http://rue89.nouvelobs.com/2013/12/21/lafrique-grandeur-nature-carte-bouscule-les-idees-recues-248512

• Fifth largest economy in the world after US, China, Japan and Germany

• IMF projects Africa will be world’s second-fastest growing economy to 2020

• World-class oil & gas/ mineral assets

• Young and growing population - by 2034, larger workforce than either China or India

• Consumer industries expected to grow by US$410bn between 2013 - 2020

• Fastest growing and second largest mobile phone market in the world

• Increasing urban migration

The importance of Africa

• Corruption

• Political instability

• Resource nationalism

• Energy shortages

• Lack of infrastructure

• Currency fluctuations

• Under-developed legal systems

• Restrictions on foreign investment

Barriers

Economic Dynamics in Africa’s Real Estate

Sector Gaimin NonyaneEcobank Group

September 2017

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017

Source: UN; Ecobank Research

• SSA’s growth averaged 5.2% p.a. in 2010-15 driven by growth in the non-mining sector, which accounted for 89% of the expansion in SSA growth.

• Non-mining sector has been boosted by revenue from the commodity boom, specifically agriculture, trade, transport and ICT and other activities, which include real estate and financial services.

• Manufacturing and construction have lagged the broader sectors.• In recent years, SSA growth has slowed amid the commodity-price shock and tight lending conditions.• Markets are now adjusting to low growth rates as economic diversification efforts to broaden growth

gains traction and as tight lending conditions continue.

SSA growth decomposition (2010-2015) Attribution analysis of average growth, 2010-15

2

24.5%

15.9%

15.6%

13.8%

10.5%

10.5%

9.1% Other Activities

Trade, restaurants &hotelsTransport & ICT

Agriculture

Mining & Utilities

Manufacturing

Construction

SSA’s changing landscape as markets adjust to shocks


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%

2010 2011 2012 2013 2014 2015

Agriculture Mining & Utilities

Manufacturing Construction

Trade, restaurants & hotels Transport & ICT

Other Activities SSA (rhs)

Source: UN

Real Estate (% of GDP)

Real estate share of SSA GDP is relatively small• Real estate accounts for an average of 6% of SSA GDP • Countries with higher per capita income appear to have larger shares

3© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

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Key factors undermining growth in real estate• Structural constraints: weak property rights regime, poor town

planning systems and a still developing financial sector.

• Restrictions on foreign capital repatriation and an inefficient tax system affect the involvement of foreign interest and private capital.

• High interest rates which undermine the development of SSA’s

mortgage finance system.

• Currency volatility which tend to dampen foreign investment to real estate.

• But foreign interest has started to rise in recent years in the hotel and

retail shopping malls sector amid modest financial sector reforms.© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017

But SSA climate still ripe for more real estate activity


Source: PWC, Building the Future of Africa

SSA has huge potential – market sizes to grow over M/T

6

Source: IMF

Expected Market Expansionaverage nominal growth rate per annum, 2017-21

0 2 4 6 8 10 12 14 16

Togo

Liberia

Congo, Rep.

Ghana

Ethiopia

Niger

Kenya

China

Burkina Faso

Benin

Tanzania

Mozambique

Senegal

São Tomé and Príncipe

Côte d'Ivoire

Sierra Leone

India

Nigeria


• providing businesses with opportunities to take advantage of economies of scale and scope

Income levels to rise, boosting consumer sectors

7

• Consumer market is developing - Per capita GDP at PPP to rise steadily (besides Equatorial Guinea), boosting consumer sectors

• But to still lag behind resource-intensive markets such as China and India

Per Capita Income, at Purchasing Power Parity, US$

Source: IMF


0

10,000

20,000

30,000

40,000

50,000

60,000

0

5,000

10,000

15,000

20,000

25,000

30,000

2014 2015 2016 2017f 2018f 2019f 2020f 2021f 2022f

Gabon

China

India

Cabo Verde

Republic of Congo

Angola

Nigeria

Ghana

Côte d'Ivoire

Zambia

Kenya

Equatorial Guinea (rhs)

8

East African countries dominate banks’ lending to real estate

Source: Ecobank Research

0

5

10

15

20

25

30

35

40

2010 2011 2012 2013 2014 2015 2016

Rwanda Uganda Kenya Ghana Nigeria Tanzania Zambia Zimbabwe UEMOA


Banks’ lending to real estate and construction sector (percent of total loans), 2010-16

Real estate investment example yields

Date Property Location Sector Seller Buyer

Estimated

price (US$

million)

Reported

yield

Q4 2015 Ikeja City Lagos, Nigeria Retail Actis/RMB

Westport/Paragon

Hyprop (75%)/

Attacq (25%)91 >8.00%

Q2 2015 Two Rivers Development

(39% stake)Nairobi, Kenya Mixed Use

Centrum Aviation

Industry

Corporation of

China70 N/A

Q4 2015

East Park Mall, Acacia Office

Park & Jacaranda Mall (50%

stakes)

Lusaka &

Ndola, ZambiaRetail/ Office Casilli Group SA Corporate 49.6 8.68%

Q2 2015Wings Oando Development

(37.1% stake)Lagos, Nigeria Office RMB Westport Pivotal 49 N?A

Q3 2016 Vodacom Building Maputo,

MozambiqueOffice

Office Sociedade De

Construçoes

Catemba

Delta (now Mara

Delta)46 6.63%

Q4 2016Cosmopolitan Mall (50%

stake)Lusaka, Zambia Retail Rockcastle Mara Delta 37.1 7.75%

Q4 2015 Bagatelle – Mall of Mauritius

(34.9% stake)

Bagatelle,

MauritiusRetail Atterbury Ascencia 28.9 7.00%

Q4 2015 Makuba Mall & Kafubu Mall

(50% stakes)

Kitwe & Ndola,

ZambiaRetail Rockcastle

Delta (now Mara

Delta)21.6 7.75%

Q4 2015 Greenspan Mall Nairobi, Kenya Mixed UseGreenspan Mall

Limited

Stanlib Kenya

Fahari I-REIT20 8.10%

Q1 2016 Barclays House Ebene,

MauritiusOffice Jade Group

Delta (now Mara

Delta)13.4 8.30%

Source: Knight Frank


Thank you



Sabina Kalyan, Global Chief Economist and Head of EMEA Strategy & Market, CBRE Global Investors James Green, Partner, K&L Gates LLP, London Gaimin Nonyane, Head of Economic Research, Ecobank Adri Kerciku, Investment Consultant, M3 Capital Partners (UK) LLP Mike Phillips, UK Editor, Bisnow Nathalie Villette, Group Head, Global Corporates, Ecobank

Global Real Estate Trends, Africa and Opportunities for 2017/2018

Tuesday 12th September 2017

tuesday 12th september 2017 global real estate trends ......5 year forecast. difference....

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