Jones Lang LaSalle 2013 Global Real Estate Outlook

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Jones Lang LaSalle's global research experts track rental performance of prime office space across 81 major markets in the Americas, Asia Pacific and Europe.
2013 Global Real Estate Outlook

Authors:
Jeremy Kelly
Global Research, Jones Lang LaSalle

David Green-Morgan
Global Capital Markets Research, Jones Lang LaSalle

Ben Breslau
Director of Research, Americas, Jones Lang LaSalle

Published in: Real Estate
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Jones Lang LaSalle 2013 Global Real Estate Outlook

  1. 1. Global Real Estate OutlookJeremy KellyGlobal ResearchDavid Green-MorganGlobal Capital Markets ResearchBen BreslauDirector of Research, Americas7th February 2013
  2. 2. Global Real Estate Outlook – Road MapGlobal Markets: Current Position 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 marketsGlobal Markets: 2013 Outlook 2
  3. 3. Global Markets – Current Position• Optimism returns, momentum gathers pace• Exceptional end to 2012• Investment and leasing markets continue to diverge … Investment – Confidence Returns • Better than expected 2012 - US$443 billion in transactions • Major risks receding, debt improving selectively • Yields in secondary attracting attention Leasing – Less Resilient • Leasing volumes down 20% on 2011 • Rental growth at 1.5% y-o-y • Vacancies edge downwards – 13.2% 3
  4. 4. Leasing markets: review and outlookJeremy KellyDirector - Global Research 4
  5. 5. Office leasingGlobal Office Property Clock Q4 2012 Shanghai, Beijing, Paris Amsterdam, Warsaw Americas Stockholm, Sao Paulo Milan, Zurich Asia Pacific EMEA Berlin Moscow San Francisco, Sydney Rental Growth Rents Hong Kong, Singapore Munich, Houston Slowing Falling Toronto Rental Growth Rents Dallas Accelerating Bottoming Out London Abu Dhabi New York, Mumbai, Delhi, Johannesburg, Istanbul Boston Washington DC Los Angeles, Mexico City, Tokyo Madrid Seoul Brussels, Dubai, Frankfurt, ChicagoSource: Jones Lang LaSalle IP, January 2013 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 5
  6. 6. Office leasing Global Office Index – Rental growth stalls 4.0Rental Change (% QoQ) 2.0 0.0 -2.0 Americas Europe Asia Pacific Global -4.0 -6.0 -8.0 -10.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 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 6
  7. 7. Office leasingOffice leasing volumes subdued US Europe Asia Pacific Global 2012 -10% -20% -20% -30% Flat -5-10% 2013 +0-5% +0-5% …but momentum building in H2 2013 7
  8. 8. Office leasingOffice vacancy rates edge downwards Americas 16.0% Europe 9.6% Asia Pacific 11.0%% 25 20 15 10 Q4 2012 movement 5 Increased Decreased Stable 0 Frankfurt Washington DC New York Boston Toronto Paris Brussels Mexico City Sydney Los Angeles Stockholm Shanghai Chicago Beijing San Francisco Sao Paulo London Singapore Hong Kong Tokyo CBD Madrid Moscow MumbaiRegional 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.Source: Jones Lang LaSalle, January 2013 8
  9. 9. Office leasing Global Office Development – deliveries below trend 20 US Europe Asia Pacificmillions sq m 15 Average 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (F) (F) 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 9
  10. 10. Office leasing Office Supply Pipeline – Markets diverge Shanghai Sao Paulo Dubai Mexico City Mumbai Moscow Tokyo CBD Beijing London Singapore Paris Frankfurt Hong Kong Brussels StockholmWashington DC Boston San Francisco New York Toronto 2013 Sydney Madrid 2014 Los Angeles Completions as % of existing stock Chicago 0 5 10 15 20 25 30 35 40Source: Jones Lang LaSalle, January 2013. Covers all office sub-markets in each city. Tokyo - CBD-3 kus 10
  11. 11. Office leasingPrime Offices – Projected Changes in Values, 2013 Rental Values Capital Values + 10-20% San Francisco San Francisco Hong Kong, Tokyo, Sydney + 5-10% Hong Kong, Tokyo, London* Moscow, London* Beijing, Shanghai, Singapore, Sydney, Mumbai Beijing, Shanghai, Singapore, Mumbai Boston, Chicago, Los Angeles, New York* Boston, Chicago, Los Angeles, New York* + 0-5% Toronto, Washington DC, Paris* Toronto, Washington DC Frankfurt, Stockholm, Brussels, Moscow, Dubai Frankfurt, Brussels, Dubai Paris*, Stockholm - 0-5% Sao Paulo, Mexico City Sao Paulo, Mexico City - 5-10% Madrid MadridProvisional. *New York – Midtown, London – West End, Paris - CBD. Nominal rates in local currency.Source: Jones Lang LaSalle, January 2013 11
  12. 12. RetailGlobal Retail Market DynamicsAsia Pacific Q4 2012 Rent Clock• Demand is healthy despite more subdued retail sales• Upswing in rents in 2013, albeit moderately Americas EMEA• Retailers becoming more selective in China Paris Asia Pacific Moscow, Hong KongEurope London• Turkey and Russia are the stand out markets Berlin Madrid• Cross-border retailers targeting prime pitches Rental Value Rental Values Shanghai growth slowing falling• Retailers under pressure to restructure Beijing• Robust rental growth in 2013 in key markets (e.g. London, Moscow, German cities) Rental Value Rental Values growth bottoming accelerating out ChicagoUnited States Dubai Washington DC• Overall market still to find cyclical trough Mumbai Delhi Boston, Sydney• Malls show tightest conditions Milan, New York City, San Francisco, Tokyo• Key gateway markets starting to turn corner Houston, Singapore e.g. New York, San Francisco, Houston, MiamiSource: Jones Lang LaSalle, January 2013 12
  13. 13. IndustrialGlobal Industrial Market DynamicsUnited States Q4 2012 Rent Clock• Markets gaining strength• Memphis, Atlanta and Dallas were the star Singapore performers in Q4, Hong Kong• Return of new construction Frankfurt Shanghai• Focus on “big-box” BeijingEurope Rental Value Rental Values Amsterdam growth slowing falling• Demand holding up, above 10y average Sydney• Take-up underpinned by supply chain realignment Philadelphia Rental Value growth Rental Values• Low supply sustaining prime rents in 2013 London, Warsaw accelerating bottoming out Inland Empire, Chicago Boston, DallasAsia Pacific Houston, Tokyo• Retail sales underpin warehousing demand Atlanta Americas• Export sector shows renewed buoyancy Paris, Madrid EMEA• Most major markets expect rental growth in Los Angeles Asia Pacific Northern 2013 New Jersey/New YorkSource: Jones Lang LaSalle, January 2013
  14. 14. Investment markets:review and outlookDavid Green-MorganGlobal Capital Markets Research Director 14
  15. 15. InvestmentYear on year growth continues in 2012Direct Commercial Real Estate Volumes by Region, 2003-2012US$ bn 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012800700600500400300200100 0 Americas EMEA Asia Pacific GlobalSource: Jones Lang LaSalle 15
  16. 16. InvestmentStrong final quarter typifies post GFC worldDirect Commercial Real Estate Volumes by Region, Q4 2008-Q4 2012US$ bn160 92% 100%140 80% 54% 60%120 47% 40%100 22% 8% 10% 11% 20% 5% 7% 80 0% -2% 0% 60 -1% -6% -20% -12% -19% 40 -27% -40% 20 -60% -60% 0 -80% Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Americas EMEAEMEA Pacific AM Asia AP Total investment (% change q-o-q, RHS)Source: Jones Lang LaSalle 16
  17. 17. InvestmentFlows increased in 2012 to $136 billionInter-Regional Flows, 2012Source: Jones Lang LaSalle 17
  18. 18. InvestmentOpportunities in Europe move transactions higherNet Inter-Regional Flows, 2011,2012 Americas More product on the market in Europe is the major factor driving inter-regional flows EMEAAsia Pacific -12 -7 -2 3 8 13 18 US$ bn 2012 2011Source: Jones Lang LaSalle 18
  19. 19. InvestmentMore balanced approach in 2012Net Investment by Type, 2011,2012US$ bn 35 25 Western governments starting to 15 dispose of property 5 -5-15-25 2011 2012-35-45-55 REIT Unlisted Institution Private Government Hotel Owner / Other Corporate Developers OperatorSource: Jones Lang LaSalle 19
  20. 20. InvestmentLack of product holds retail back in 2012Net Investment by Sector, 2011,2012 2011 2012 3% 1% 3% 3% 8% 7% 12% 13% 47% 50% 29% 24% Office Retail Industrial Hotel Mixed OtherSource: Jones Lang LaSalle 20
  21. 21. InvestmentSecondary cities starting to see more dealsNet Investment by Type, 2011,2012Source: Jones Lang LaSalle 21
  22. 22. InvestmentReal estate attracts the cashFund Raising by Strategy 2012 Fund of Funds 4% Other Growth 0% 6% Real Assets 6% Secondary 8% Buyout 43% Venture 8% Debt 12% Real Estate 13%Source: Bloomberg 22
  23. 23. InvestmentMore movement in secondary, Prime stagnantPrime Offices Yield Shift Brussels Frankfurt LondonEurope Madrid Moscow Paris Stockholm Boston Chicago Los AngelesAmericas New York San Francisco Toronto Washington DC Sao Paulo Mexico City BeijingAsia Pacific Hong Kong Mumbai Q3 2012 - Q4 2012 Shanghai Singapore Q4 2011 - Q3 2012 Sydney Basis point change Tokyo -150 -100 -50 0 50 100Source: Jones Lang LaSalle, January 2013 23
  24. 24. InvestmentUK led markets lower in 2006, what about 2013?Net Investment by Type, 2011,2012 Global Returns All Property UK Returns All Property 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 2012Source: IPD 24
  25. 25. Prime Offices - Capital Value Clock The Jones Lang LaSalle Property Clocks SM Q4 2011 Q4 2012 Hong Kong, New York, Boston, Chicago Singapore, Paris Singapore, Amsterdam Los Angeles, Shanghai, Beijing Sao Paulo Amsterdam Shanghai, Washington DC, London Hong Kong Toronto Stockholm Washington DC Berlin Milan, New York San Francisco Paris Beijing, Stockholm, Houston Milan Boston Capital value Capital values Capital value Capital values Berlin, Moscow growth slowing falling Moscow growth slowing falling Chicago, SanFrancisco, Sao Paulo Capital value Capital values London Capital value Capital values Toronto growth bottoming out Mexico City growth bottoming out Los Angeles accelerating Sydney accelerating Houston, Frankfurt Frankfurt Dallas Dallas Sydney Mexico City Mumbai Madrid Mumbai Madrid, Seoul Tokyo Tokyo, Brussels Seoul, Brussels Based on notional capital values for Grade A space in CBD or equivalent. Americas EMEA Asia Pacific US positions relate to the overall market 25
  26. 26. Investment$500 billion in sight for 2013Direct Commercial Real Estate Volumes by Region, 2003-2013 US$ bn 800 700 600 500 400 300 200 100 0 Americas EMEA Asia Pacific Global 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (forecast)Source: Jones Lang LaSalle 26
  27. 27. 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 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 27
  28. 28. Global Real Estate OutlookQuestions and AnswersJeremy Kelly David Green-Morgan Benjamin BreslauDirector - Global Research Global Capital Markets Head of Americas Research Research DirectorJeremy.Kelly@eu.jll.com David.Green-Morgan@ap.jll.com Benjamin.Breslau@am.jll.com 28
  29. 29. Our Global Research Platform Global Capital Flows  Tracking Real Estate Investment Global Market Perspective  Spotting Real Estate Trends Global Retail  Redefining Retail Investment Global Office Index  Monitoring Performance Transparency  Understanding Operating Conditions Sustainability  Transforming the Property Industry World Winning Cities  Identifying New Markets Global Research Hub joneslanglasalle.com/Research 29
  30. 30. Global Real Estate OutlookJeremy Kelly David Green-Morgan Benjamin BreslauDirector - Global Research Global Capital Markets Head of Americas Research Research DirectorJeremy.Kelly@eu.jll.com David.Green-Morgan@ap.jll.com Benjamin.Breslau@am.jll.com Thank you 30

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