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10 EMEA Predictions for 2014

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  • 1. DECEMBER 2013 | 10 EMEA PREDICTIONS FOR 2014 RESEARCH & FORECASTING EMEA 10 EMEA PREDICTIONS FOR 2014 TOTAL CROSS BORDER INVESTMENT, ALL SECTORS 4,000 year to date 2013 3,500 2012 +126% +267% 3,000 mln eur 2,500 2,000 1,500 Source: RCA Spain Ireland Italy ANNUAL CHANGE IN COMMERCIAL PROPERTY INVESTMENT, Q1-Q3 2013 VS. Q1-Q3 2012 60% 51% 50% 54% 30% 20% 9% 0% -10% -20% -30% France E-commerce to continue transforming logistics and retail sectors Ireland -24% Paris If 2013 was the “Year of Transition” with banks restructuring and selling off ‘servicing platforms’ and ‘non-performing loans’ to foreign private equity and special situation funds, then 2014 is likely to be the ‘Year of Consolidation and Stabilisation’ with cross border opportunistic investors exploiting a widening yield gap between prime and secondary. Occupier markets will remain weak as lack of finance and business uncertainty means that business will remain cautious. High unemployment may pressure government and cause slippage in EU deficit targets. The French economy will improve from H2 14 onwards, but French unemployment will remain high and public debt issues will undermine the government’s strength to effect further reforms in France and influence wider Eurozone reform initiatives. The gloss on Paris’ pre-eminence as an international safe haven will remain somewhat dulled, although cross border opportunistic funds will continue to exploit perceived weaknesses as leasing markets move beyond the 2013 cyclical trough. E-commerce will continue to transform the logistics and retail sectors. 40% 10% Cross border capital flows from Asian and MENA countries will continue to find their way into core European markets pressuring yields and putting upward pressure on capital values. Lack of institutional grade stock and keen competition in core markets will drive renewed investment and development activity in peripheral markets and second tier European cities EMEA wide, but especially in the German ‘Alternative Twenty’, the Polish ‘Big Six’, Spain and Ireland. Pension funds and insurers are set to take on a much greater volume of real estate loans and debt placements as bank balance sheets continue to shrink. Cross border opportunistic investors to exploit widening yield gap 500 0 Cross border capital flows to peripheral markets and second tier cities Spain +98% 1,000 Europe International businesses will continue to be attracted by comparative costs London Munich Frankfurt Source: RCA DUBLIN: OFFICE RENTS HAVE BOTTOMED OUT AND CONSTRUCTION HAS DRIED UP H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 eur/sqm/month sqm under construction (Right axis) Average rents CBD (Left axis) 40.0 90,000 80,000 35.0 70,000 30.0 60,000 25.0 50,000 s q 20.0 40,000 m 15.0 30,000 10.0 20,000 5.0 10,000 0.0 0 Source: Colliers International www.colliers.com/uk Ireland is the first Eurozone country to exit the bailout system. The Irish economy will continue to improve with an export led recovery. Recovery in the Central Dublin residential and commercial property markets will continue, with international businesses continuing to be attracted by low corporate taxation rates and competitive labour costs. Prime retail pitches will continue to see international brands competing for space. Recovery ex-Dublin, will be much slower and protracted. Nordics Intense competition for ‘safe haven’ assets will force investors to be creative Economic activity will accelerate across Scandinavia, with only oil-driven Norwegian economy set to slow as signs of the “Dutch disease” take their toll. A revived economy will benefit the leasing markets with more rental growth to come in Helsinki and Stockholm in the next 12 months and further upward pressure on values. The region will continue to appeal to foreign investors due to its safe haven status, but intense local competition will force some of the capital to be more creative in acquisitions, both in terms of sector and geographies, as highlighted by Starwood Capital’s recent purchase of retail assets in Sweden.
  • 2. DECEMBER 2013 | 10 EMEA PREDICTIONS FOR 2014 480+ offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 LONDON 50 George Street London W1U 7GA +44 20 7935 4499 RESEARCH AND FORECASTING Mark Charlton +44 20 7487 1720 mark.charlton@colliers.com Walter Boettcher +44 20 7344 6581 walter.boettcher@colliers.com Bruno Berretta +44 20 7344 6938 bruno.berretta@colliers.com UK Increased business confidence will support improvement in occupier markets UK consumer confidence and economic recovery will strengthen in 2014 with real GDP likely to rise by 2.5% as the government continues to stimulate the economy through policies aimed at supporting house prices and increasing household spending in the run-up to the 2015 election. Increased business confidence will lead to rental growth UK wide as occupier markets strengthen and business expansion gains traction. UK base rates will not rise until 2016. UK regional markets and secondary assets are increasingly in focus Property investment transactions will grow beyond the £40bn recorded by year-end 2013, but will fall short of the 2006 peak level of £58bn. In the absence of quality supply and keen competition from international cash buyers, domestic investors will look beyond core markets and assets to regional and secondary assets requiring capital expenditure and redevelopment into institutional grade product. This demand will result in lower yields in London and moderate yield compression across secondary asset classes. Central and Eastern Europe Opportunistic investors will turn attention to South East Europe as political tensions ease Negative political perception, heightened by recent political tensions in Ukraine, will dissipate in 2014, with non-core markets – primarily Romania, but also Hungary and Bulgaria - expected to see renewed investment activity and interest in 2014. We may even see increased investment activity in the more emerging investment market of Serbia, which has undertaken significant political and economic reforms in preparation for EU accession, supporting the appeal of the country to various forms of Foreign Direct Investment (FDI). Greece also looks to have turned a significant corner and should see renewed levels of investment activity driven by opportunity-led investors. Africa South Africa remains a preferred destination, but other countries are now on the radar Increased political stability in some countries, infrastructure investment, continuing urbanization and healthy economic growth rates will create new opportunities across Africa for corporates looking to new markets to both improve margins and revenues. The active companies will largely come from the Oil & Gas, Telecoms , FMCG and Banking sectors. While South Africa will remain the preferred destination for many established players and new entrants, other countries will be increasingly on the radar, particularly Angola, Namibia, Botswana, Uganda, Ghana, Kenya and Nigeria. AFRICA RISING STARS AT A GLANCE Ease of doing business; SSA ranking 2013, out of 47 total population (mln) 5 29% 6.1 25 Nigeria 20 24% 7.4 165 South Africa 3 100% 2.9 51 Kenya Colliers International is the licensed trading name of Colliers International Property Advisers UK LLP which is a limited liability partnership registered in England and Wales with registered number OC385143. Our registered office is at 50 George Street, London W1U 7GA GDP growth forecast 2014 Ghana Disclaimer: This report gives information based primarily on published data which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation to the forecasts, figures or conclusions contained in it and they must not be relied on for investment purposes. This report does not constitute and must not be treated as investment advice or an offer to buy or sell property. December 2013 13269 % of South Africa GDP/capita 2012 12 16% 6.2 42 Uganda 13 13% 6.5 36 Botswana 4 139% 4.1 2 Namibia 8 69% 4.0 2 Angola 40 54% 6.3 20 Top performer Sub-Saharan Africa Rwanda Equatorial Guinea ($26,486 ; 2.3 times South Africa) Sierra Leone (14%) - bar South Sudan Nigeria Source: IMF WEO, World Bank Middle East Large-scale infrastructural investment will continue across the GCC Accelerating success. www.colliers.com/uk Despite continued political instability in specific areas and global petroleum supply/demand uncertainties, the Middle East economies will continue to see steady non-oil growth. Unemployment though will remain high and provide scope for further political turbulence. A gradual normalisation nonetheless is expected in Egypt through the year. 2014 will also be the year of continuing significant infrastructure expenditure across the GCC region in social infrastructure (housing, hospitals and schools) and primary economic infrastructure (roads and rail). Completion of large scale mixed use development projects particularly will contribute to on-going urbanisation in the region.