Winning In Growth Cities EXPO REAL 2012 presentation

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Cushman & Wakefield's Global Market experts; Michael Rhydderch, John Stinson, David Hutchings and John D. Busi discuss the main targets for investment in today's international real estate market at …

Cushman & Wakefield's Global Market experts; Michael Rhydderch, John Stinson, David Hutchings and John D. Busi discuss the main targets for investment in today's international real estate market at Expo Real as they successfully launch the Winning In Growth Cities 2012/13 report.

This report has been prepared based on data collected through our own research as well as information available to us from public and other external sources.

This report is an essential guide for those interested in international property investment and underlines our true global expertise. Visit www.winningingrowthcities.com to download the full report.

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  • 1. WINNING INGROWTH CITIES 2012/2013
  • 2. WELCOME Michael Rhydderch Partner Head of EMEA Capital Markets
  • 3. WINNING IN GROWTH CITIES 2012/2013AGENDAWELCOMEGLOBAL TRENDS: David HutchingsREGIONAL OUTLOOK• European Markets: Michael Rhydderch• Asia Pacific: John Stinson• The Americas: John BusiDISCUSSION EXPO REAL CUSHMAN & 2 WAKEFIELD
  • 4. GLOBALTRENDS David Hutchings Partner Head of European Research Group
  • 5. WINNING IN GROWTH CITIESTHE HEADLINES 2012/20132012» The top 10 global cities speak for Top Cities for Investment 3.5% of population and 4.8% of 40 GDP but 36% of recent property activity 35» New York strengthened its lead at 30 the top with a 19% increase in 25 trading volumes US$ Bn Yr to June 20» London is 2nd overall after a 4% increase but was top again for 15 cross border buyers 10» Tokyo stays in 3rd despite a slowing in trading activity 5» Paris had a strong year, up 10% in 0 4th place Q2 09 Q2 10 Q2 11 Q2 12» LA and Hong Kong saw a New York London Tokyo flattening in activity but stand in 5th Paris LA Hong Kong and 6th EXPO REAL CUSHMAN & 4 WAKEFIELD
  • 6. WINNING IN GROWTH CITIESTOP 25 GLOBAL CITIES 2012/2013Top Cities and Areas of Growth» Top tier outperforms: Top Cities for Investment: 2011/12 » Top 25 cities see investment rise 6% versus a 0.8% gain for the market as a New York $34.7 whole (excluding development) London $29.3 Tokyo $23.9 » Top 25 take a 56% share of the market Paris $19.4 LA versus 53% last year and 46% in 2009 $17.0 Hong Kong $16.8 » 21 of the top 25 make it back from last San Fransisco $15.4 Washington DC $13.8 years list Chicago $10.6 US$ Bn Yr to Q2 2012 Toronto $8.0 » London was top for office and hotel Shanghai $7.9 investment, Hong Kong for retail, Los Dallas $7.9 Boston Angeles for industrial, New York for $7.5 Houston $7.3 Multi-family and Shanghai for Singapore $7.3 development land Miami $6.5 Sydney $6.4 » Overall however, American cities Stockholm $6.4 Seoul $6.0 dominate the 2012 lists for volumes and Seattle $5.9 growth Atlanta $5.9 Berlin $5.8» Income in demand Moscow $5.2 Phoenix $5.0 » Investors have become hungrier for Denver $4.6 yield but still favour mature, liquid 0 10 20 30 40 markets » Only 8 of the top 25 targets also appear on the list of the 25 lowest yielding EXPO REAL CUSHMAN & 5 WAKEFIELD
  • 7. WINNING IN GROWTH CITIESREGIONAL DIFFERENCES 2012/2013Americas ahead - led by domestic buyers No. of Top 25 Cities No. of Top 25 Cities No. of Top 25 Cities by investment volume by growth in investment for foreign investors 18 1216 1614 10 1412 12 810 10 8 6 8 6 6 4 4 4 2 2 2 0 0 0 Americas Asia Europe Americas Asia Europe Americas Asia Europe EXPO REAL CUSHMAN & 6 WAKEFIELD
  • 8. WINNING IN GROWTH CITIES DRIVERS OF CITY SUCCESS 2012/2013 Quantity versus Quality? » New York and London•Shanghai feature as leaders in most •Paris•New York areas •London•Seoul •New York•Singapore •Amsterdam•Hong Kong •Munich•London •Tokyo » Asian competition is increasing from regional hubs (Singapore and Hong Kong) Scale/Recent Innovation, culture Growth and environment and national powerhouses (Tokyo, Shanghai, Beijing, Seoul) Property Investment Business Functions » European middle-weights like•New York Amsterdam and Munich rank•London •London highly•Tokyo •New York•Paris •Tokyo•Los Angeles •Hong Kong•Hong Kong •Toronto » LA, San Francisco and •Paris Toronto are top 20 cities but Latin America has yet to feature – albeit with Sao Paolo and Mexico City EXPO REAL CUSHMAN & 7 WAKEFIELD moving up
  • 9. WINNING IN GROWTH CITIESTHE OUTLOOK FOR 2013 2012/2013-The Beginning of More Active Times?» Risk aversion and low interest rates will keep investors focussed on core global cities in 2013 but a steady spreading of interest in search of yield and future income growth will pick up as the year progresses.» 2013 will not in general be a year of growth but if politicians get their act together, it will be a year of stabilisation, consolidation and the start of an increase in activity as banks, investors and companies look to act.» More risk taking will in fact be evident as soon as uncertainty starts to ease, aided in some cases by better finance availability and in others by more stock coming to market.» Tier 2 locations in core markets will benefit first but interest in emerging economies is picking up among occupiers as they seek future growth markets and investors will follow.» The export of capital from emerging markets to the West is also a long term trend as the market globalises.» The macro environment is shifting: with reforms starting in emerging and mature markets that will further expand the investment universe.» Prime values will be stimulated by under supply and some areas of the secondary market will benefit from this – but only where they offer an attractive solution for occupiers. EXPO REAL CUSHMAN & 8 WAKEFIELD
  • 10. AMERICANTRENDS John D. Busi Executive Vice President Valuation & Advisory
  • 11. WINNING IN GROWTH CITIESINVESTMENT TRENDS IN THE AMERICAS 2012/2013Top Cities and Areas of Growth» Americas lead the way: Top Cities for Investment: 2011/12 » 14 out of 25 of the top global cities for New York $34.68 investment last year and 17 out of 25 of LA $16.97 the fastest growing were in the San Fransisco $15.39 Americas Washington $13.80 » New York was again the top global Chicago $10.57 market with LA also in the top 5 Toronto $8.03 Dallas $7.89 » Canada performs well with 3 top 50 US$ Bn Yr to Q2 2012 Boston $7.52 cities. Houston $7.30 Miami $6.52 » Sao Paolo is the highest ranked Latin Seattle $5.94 American market (68th) Atlanta $5.91 » All sectors bar development land were Pheonix $5.04 dominated by American cities, most Denver $4.60 notably multi-family (19 out of top 25) San Diego $4.49 Philadelphia $2.85» Robust but slower than expected Baltimore $2.85 Austin $2.84 » Domestic recovery, global risks led by Charlotte $2.72 Europe and the upcoming fiscal cliff Vancouver $2.28 have weighed on the USA while weaker commodity demand and slower growth 0 10 20 30 40 in China have also hit Latin America » With caution higher, take up and absorption has been softer and rental EXPO REAL CUSHMAN & 10 WAKEFIELD
  • 12. WINNING IN GROWTH CITIESKEY THOUGHTS ON THE MARKET AHEAD 2012/2013American MarketsTHE MACRO PICTURE OCCUPIERS• Volatile, but going in the right direction • Set to remain cautious in the year ahead• All eyes to stay on the European debtcrisis as well as the US “fiscal cliff” • A shortage of space in many areas/sectors will trigger real rent growth• Private sector balance sheet healthier: in most markets in 2013confidence to spend and invest is key • Tenants will continue to seek to trade• Policy to loosen in Latin America: Brazil up in all sectors, releasing moreto outperform Mexico in 2013? unwanted space in the process and aINVESTORS trend towards greater space efficiency CITY TARGETS will continue• Rent expectations have been • Core cities to remain favoured but challenged by the weaker economy but second tier markets to challenge more yield demand will generate more risk as investors seek future growth potential taking once political uncertainties ease • Foreign investors will broaden their• Development risk increasingly to be target list in the USA and beyond taken: residential in the USA, retail and • Flight to quality to still dominate but housing in Latin America, logistics with growing interest in skill clusters, led generally by technology, followed by resource• Debt availability to improve in clusters EXPO REAL CUSHMAN & 11 secondary/ tertiary markets as CMBS WAKEFIELD
  • 13. WINNING IN GROWTH CITIESTARGETS FOR INVESTMENT 2013 2012/2013American MarketsCOREOffices • US CBD Gateway cities (New York, San Francisco, Washington DC) • Core Canadian cities (Toronto, Vancouver)Retail • Core 24 hour gateway cities in USA and CanadaApartments • Multi-family in top US cities (New York, Boston, San Francisco, Los Angeles)CORE-PLUSOffices • Core space, growth markets (Austin, Portland, Dallas, Houston, Seattle, with the latter 3 edging towards core) • Suburban offices in core US & Canadian citiesLogistics • Core assets (South California, New Jersey, Miami, Chicago)New markets • Core leased assets in Latin America, led by Sao Paolo and SantiagoOPPORTUNISTICOffices • Mexican cities for short term gainLeasing risk • Under-rented Grade A US office and apartment property (South Florida, Dallas, Chicago)Development • Retail & residential: Santiago, 1st and 2nd tier Brazilian and Mexican citiesLogistics • Markets servicing key Mexican and Brazilian cities EXPO REAL CUSHMAN & 12 WAKEFIELD
  • 14. EUROPEANMARKETS Michael Rhydderch Partner Head of Capital Markets EMEA
  • 15. WINNING IN GROWTH CITIES INVESTMENT TRENDS IN THE EUROPEAN MARKETS 2012/2013 Top Cities and Areas of Growth» Europe slow but steady: Top Cities for Investment (Ex. Dev. Sites): 2011/12 » Europe represents 5 out of the top 25 cities London Metro $29.31 for global investment Paris $19.43 » London and Paris strongest regional Stockholm $6.36 cities, second and third respectively Berlin $5.78 Moscow $5.17 » London tops 3 investment rankings: Rhine-Rhur $4.47 offices, hotel and cross-border Frankfurt/Rhine-Main $3.98 » Core German cities Berlin, Frankfurt and Munich $3.85 Munich feature strongly, with all 3 appearing Amsterdam/Randstad $3.65 in the top 25 locations for cross-border Hamburg $2.95 investment Oslo $2.80 W arsaw $1.96 » Moscow strongest Eastern market, making Stuttgart $1.91 the top 25 rank for global investment. Warsaw Copenhagen $1.80 is 12th in Europe, 49th globally Manchester Metro $1.70 Birmingham $1.56» Caution still permeates the market: S Petersburg t $1.40 » Weaker economic conditions have dampened Gothenburg $1.38 market confidence and activity Reading $1.35 Madrid $1.34 » Robust demand remains for high-quality product at the expense of secondary 0 10 20 30 US bn, Year to Q2 2012 $ » Core cities benefit from falling vacancy amidst little development EXPO REAL CUSHMAN & 14 WAKEFIELD
  • 16. WINNING IN GROWTH CITIESKEY THOUGHTS ON THE MARKET AHEAD 2012/2013EuropeTHE MACRO PICTURE OCCUPIERS• Economic stabilisation with low, but • Limited development pipeline to be apositive growth, in 2013 major influence on performance• Sovereign debt crisis will continue to • Improving corporate confidence likelyweigh on market confidence but may to renew upward pressure on rents innow be starting to stabilise markets with limited high-quality supply• Discussion on greater fiscal later in 2013cooperation and control will potentially • Larger deals to return but upgradingact to steady the market and consolidation will still dominateINVESTORS CITY TARGETS• Equity players will continue to dominate • Strong demand for prime or Grade A core markets. property in core cities• Non-core activity to rise as • Broader range of targets to emerge deleveraging and public sector sales • Distressed markets in the weaker increase economies to see more interest once• Yield pressures to polarise: renewed pricing has moved, notably in the major falls for the best but increases for cities of Italy, Spain and Portugal poorer stock as pricing transparency EXPO REAL CUSHMAN & 15 WAKEFIELD
  • 17. WINNING IN GROWTH CITIESTARGETS FOR INVESTMENT 2013 2012/2013European MarketsCOREOffices • London, Paris, Stockholm, Munich and FrankfurtRetail • Core German cities including Munich and Stuttgart • Paris, London and StockholmLogistics • London, Paris, Munich, Hamburg and StockholmCORE-PLUSOffices • Amsterdam, Berlin, UK Thames Valley, Prague and Warsaw • Development in core cities (London, Paris, Stockholm, Frankfurt)Retail • Larger cities in Italy, Poland, Netherlands, as well as PragueLogistics • Rotterdam, Antwerp, Warsaw, Prague and BudapestOPPORTUNISTICOffices • Lisbon, Moscow, Istanbul and MilanRetail • Major cities in Turkey • Active management/development in larger Western citiesLogistics • Serving large Eastern European citiesDistress • Italy, Spain and Portugal EXPO REAL CUSHMAN & 16 WAKEFIELD
  • 18. ASIAPACIFICMARKETS John Stinson Partner Head of Capital Markets Asia Pacific
  • 19. WINNING IN GROWTH CITIES INVESTMENT TRENDS IN ASIA PACIFIC 2012/2013 Top Cities and Areas of Growth» Asia growing fast: Top Cities for Investment (Ex. Dev. Sites): 2011/12 » Asian locations took 6 of the top 25 cities for global investment (ex. dev. Sites) and 3 of Tokyo $23.92 the top 5 fastest growing investment markets Hong Kong $16.81 Shanghai $7.90 » Note : Of the 6 in the Top 25 Singapore $7.30 Tokyo, Singapore, Hong Kong, Seoul Sydney $6.41 suffered a reduction in total volume over Seoul $6.00 2010/2011; Shanghai, Sydney increased Taipei $4.32 Melbourne $3.40 » Office: Of the 4 Asian cities in Top 10 Brisbane $3.26 Tokyo, Seoul, Hong Kong suffered reduction Guangzhou $3.20 in volume over 2010/2011, Shanghai Beijing $3.08 increased Osaka $2.89 » Retail: Of the 5 Asia cities in the Top 25 Perth $1.87 Hong Kong, Shanghai, Guangzhou, Taipei Nagoya $1.05 increased growth over 2010/2011 Fukuoka $0.85 volume, Tokyo decreased Canberra $0.79 Suzhou $0.76 » Industrial : 7 in top 25 however Hong Kuala Lumpur $0.72 Kong, Sydney, Singapore contracted. Adelaide $0.67 Tokyo, Taipei, Shanghai grew. Chengdu $0.64 » Asian cities continue to dominate in the 0 10 20 30 development sector, taking all 25 spots for US bn, Year to Q2 2012 $ investment in development sites . However Shanghai, Beijing reduced volume over EXPO REAL CUSHMAN & 18 WAKEFIELD 2010/2011
  • 20. WINNING IN GROWTH CITIES INVESTMENT TRENDS IN ASIA PACIFIC 2012/2013 Top Cities and Areas of GrowthContinued : Top Cities for Investment (Ex. Dev. Sites): 2011/12 » Tokyo was the strongest city in the region, ranking 3rd overall and appearing in Tokyo $23.92 the top 5 for the majority of the investment Hong Kong $16.81 rankings Shanghai $7.90 Singapore $7.30 » Hong Kong is the highest ranked Chinese Sydney $6.41 city (6th place) Seoul $6.00 Taipei $4.32 » Australian cities Sydney, Melbourne and Melbourne $3.40 Brisbane all in the top 25 cities for office Brisbane $3.26 investment Guangzhou $3.20» Healthy but moderating economic markets: Beijing $3.08 Osaka $2.89 » Domestic pick-up less than Perth $1.87 hoped, particularly in cities within China and Nagoya $1.05 Japan. Activity boosted by low interest rates Fukuoka $0.85 and good debt availability Canberra $0.79 » Asia fuelling growth in the global retail Suzhou $0.76 market, leading to an influx of international Kuala Lumpur $0.72 retailers into the top cities Adelaide $0.67 Chengdu $0.64 0 10 20 30 US bn, Year to Q2 2012 $ EXPO REAL CUSHMAN & 19 WAKEFIELD
  • 21. WINNING IN GROWTH CITIESKEY THOUGHTS ON THE MARKET AHEAD 2012/2013Asia PacificTHE MACRO PICTURE OCCUPIERS• Asia markets have not escaped global • Global uncertainty may slow corporateconcerns expansion but only in the short term• HK and Shanghai first to slow and now • Growth of retailing and e-tailinggenerating more opportunities expected to keep logistics and retail• Policies in place to stimulate more markets robustactivity in this quarter and 2013 • Office rental growth prospects positive for Grade A SpaceINVESTORS CITY TARGETS• Low interest rates and better debt • Core cities will remain primary focus, availability will continue to boost activity with increasing positive sentiment to more locations• Investment set to remain buoyant as more good-quality product is released • Focus on high quality property in all and local investors test the market areas and sectors• High-quality assets seeing healthy • Further international interest anticipated foreign buyer interest, especially as for key Chinese cities of Hong Kong, certain markets relax investment Beijing and Shanghai regulations EXPO REAL CUSHMAN & 20 WAKEFIELD
  • 22. WINNING IN GROWTH CITIESTARGETS FOR INVESTMENT 2013 2012/2013Asia PacificCOREOffices • Sydney, Melbourne, Perth, Shanghai, Beijing ,TokyoRetail • Shanghai and Beijing • Defensive core markets (Singapore, Hong Kong, Sydney and Tokyo)Hospitality • Singapore, Hong Kong and TokyoResidential • JapanCORE-PLUSOffices • Singapore, Hong Kong, Kuala LumpurRetail • Growth markets (Osaka and Seoul)Logistics • Sydney, Tokyo, Singapore and Hong KongResidential • Singapore , China ( west ) , India ( Mumbai , Bangalore , Delhi )OPPORTUNISTICOffices • Emerging growth markets (Jakarta, Mumbai, Bangalore, Guangzhou and Shenzhen)Retail • Emerging markets (Hanoi, Kuala Lumpur, Bangkok, Jakarta, New Delhi as well as other top Indian cities)Logistics • Gateway Chinese cities (Shanghai, Beijing and Guangdong) EXPO REAL CUSHMAN & 21 WAKEFIELD
  • 23. DISCUSSION Question & Answer Session
  • 24. www.cushmanwakefield.comMICHAEL RHYDDERCH JOHN D. BUSIHead of EMEA Capital Markets Executive Vice Presidentmichael.rhydderch@eur.cushwake.com john.busi@cushwake.comDAVID HUTCHINGS JOHN STINSONHead of European Research Group Head of Asia Pacificdavid.hutchings@eur.cushwake.com john.stinson@ap.cushwake.com