EMEA Commercial Real Estate Update

EMEA Commercial Real Estate Update

Neil Blake

Neil Blake

Head of EMEA Research


As we move towards the busy 4th quarter trading period, this report highlights some of the major trends seen in European commercial property markets so far in 2016. The big event in the political sphere was undoubtedly the surprise result in the UK referendum but excluding the UK, the demand for real estate in Europe has remained strong.

Of the 35 largest non-UK office markets in Europe, prime office yields have continued to fall in 22 of them so far in 2016. Yields have remained stable in all of the rest except Oslo which has seen a small rise. Similar trends are seen for retail and industrial and logistics properties.

The increased attraction of prime property is linked to the policy adopted by the ECB over the past two years. We now have negative short-term policy rates and very low long-term government bond yields. This has pushed investors towards alternative “near bond-like” assets which offer some characteristics of fixed income and security. Prime property goes some way to fitting the description and steadily rising rents and falling vacancy have helped to make the case.

In the short-term, UK prices and volumes look to have been hit by the referendum result although the UK economy has been surprisingly resilient. Judging the short-term impact is difficult enough because of a lack of transactional evidence over the summer months. Assessing the longer term impacts in the current information vacuum over the UK’s eventual long-term relationship with the EU is very difficult indeed but no doubt it will be a recurring topic over the coming years.

The pattern of office leasing across the European markets continues to reflect the economic situation: positive but slow growth with some marked differences from place to place reflecting offsets in the timing of cycles; all tempered with a degree of caution from the lead-up to, and result of, the EU referendum in the UK.

The majority of retail markets across Europe have seen positive retail sales volume growth so far in 2016 and the EU average growth rate has been a healthy 3.2% (6 months to May-July annualised). The fastest growth has mainly been seen in Central European countries although Spain and Portugal are seeing cyclical bouncebacks. Perhaps surprisingly, the UK is also amongst the leaders despite referendum-related worries.

The industrial & logistics markets have performed well in the first half of the year and appear to have been relatively unscathed by Brexit concerns and other political turmoil in Europe. This was also the case in the UK, where logistics occupier demand was surprisingly strong amidst a general pre-referendum slowdown.

Read more

Click here
CBRE Launches First Logistics Property Index

CBRE Launches First Logistics Property Index

Andrew Marston

Andrew Marston

Research Director

Stephen Marshall

Stephen Marshall

Senior Director

Ben Thomas

Ben Thomas

Director


CBRE LAUNCHES FIRST LOGISTICS PROPERTY INDEX

CBRE has today released a benchmark index tracking investment performance of modern logistics stock across the UK, the ‘CBRE UK Logistics Index’. This is the only index that focuses exclusively on the modern warehousing property industry in the UK.

According to the ‘CBRE UK Logistics Index’, the total return for UK logistics for H1 2016 was 4.4%. Despite being down from 8.9% in the second half of 2015, logistics outperformed the wider industrials sector and all UK property collectively, which saw returns of 3.6% and 3.0% respectively. The logistics performance comprised 1.7% of capital growth and 2.7% of income return. Capital growth in particular has been hit, having grown by 5.9% in H2 2015. This is, in part, due to the impact of the changes to Stamp Duty Land Tax in the 2016 Budget. Over the 12 months to the end of June, total returns in the logistics sector stood at 13.6%, with capital growth at 7.7%.

In contrast, rental growth rates have remained stable. At the UK level, rental value growth in the six months to June 2016 was 2.2%, unchanged from H2 2015. It is the second fastest rate of rental growth recorded on the Index, which has been backdated to the start of 2010. At a regional level, the highest returns in H1 2016 were seen in the North of England, where the total return was 6.9%. Returns were also robust in the Midlands at 5.5%, with the lowest returns in the South East, at 3.2%. Superior rental growth in the North and Midlands contributed to this outperformance over the past six months.

The ‘CBRE UK Logistics Index’ is comprised of repeat valuations of large, modern warehouse stock built since 2000, valued by CBRE, and owned by some of the leading investors in the UK logistics sector. The data for H1 2016 is based on the collective performance of 280 individual assets, with a combined capital value of £8.22 billion at the end of June 2016. The index will be updated every six months.

“With the launch of the ‘CBRE UK Logistics Index’ we can, for the first time, focus a spotlight on the performance of what is now a mature real estate asset class. The first Index confirms why the logistics sector has been such a popular choice amongst investors in recent years. Regardless of whether we look at a holding period of one, three or five years, logistics real estate has consistently outperformed both all property and all industrials in terms of total returns, capital growth and rental value growth. For example, the annualised total return for the three years to the end of June 2016 for logistics is 19.9%, compared to 11.3% for all industrials and just 8.8% for all property on the CBRE UK Logistics Index.”

Andrew Marston, CBRE’s Director of Research for National Office Markets

Find out more

Click here
The London Perspective

The London Perspective

Neil Adams

Neil Adams

Director

London’s momentum may be slowing but it remains strong.

Uncertainty abounds with the forthcoming Mayoral elections and BREXIT referendum, but this increased risk needs to be considered in a global context.  This report examines the underlying fundamentals of the various sectors within London.

Find out more

Download the full report
Netherlands: Investing in a better Living

Netherlands: Investing in a better Living

Jo Winchester

Jo Winchester

Senior Director

We are pleased to present the CBRE’s research report on student housing in the Netherlands. The report has been written in response to the growing interest of both domestic and international investors in this emerging asset class in the Netherlands. In recent years, this interest has resulted in a growing number of investments in new developments, redevelopment schemes and in turn-key, operational properties.

Find out more

Read the full report