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European Market Outlook

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European Market Outlook April 2012 – PowerPoint PPT presentation

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Title: European Market Outlook


1
European Market Outlook
  • April 2012

2
Agenda
  • European overview
  • European property market recent trends and
    forecasts
  • Capital market trends
  • European scenario analysis

3
Divergent economic outlook
GDP growth forecasts for 2012
Source Various Statistics Agencies, DTZ Research
4
Bond markets calmer following LTRO, but Italian
and Spanish yields have risen once again
5 year government bond yields, selected countries
Source Bloomberg, DTZ Research
5
Agenda
  • European overview
  • European property market recent trends and
    forecasts
  • Capital market trends
  • European scenario analysis

6
Little rental growth expected in near term
European rental growth
Source DTZ Research
7
Prime office and retail rents mostly flat in
recent months
Prime rents
6 month change, Q3-11 to Q1-12
Source DTZ Research
8
Vacancy rates stable in most markets
Office market vacancy rates
Q3-11 and Q1-12,
Average 11.3
Q1-2012 X Q3-2011 Region
Average
Source DTZ Research
9
Strongest growth seen in Eastern Europe
Office rental growth 2012
Source DTZ Research
10
Stable yields points to period of weak capital
growth
European capital growth
Source DTZ Research
11
Office and retail yields also little changed over
past 6 months
Prime office yields
Q1-12 yields and 6 month bps change, Q3-11 to
Q1-12
Source DTZ Research
12
Yields in core markets to edge upward as interest
rates normalise....
Prime yield forecasts for selected markets
2012-16
Source DTZ Research
13
.....yields in CEE to edge inward as the European
economy recovers
Prime yield forecasts for selected markets
2012-16
2012-2016 (pa)
Source DTZ Research
14
Agenda
  • European overview
  • European property market recent trends and
    forecasts
  • Capital market trends
  • European scenario analysis

15
Full year volumes up 6 year on year despite
increased caution
European investment activity
Source DTZ Research Propertydata
14
16
Contrasting fortunes across Europe
European investment activity by geography
Source DTZ Research Propertydata
15
17
2011 growth mostly driven by capital value
increases
Drivers of European investment activity
Source DTZ Research
16
18
Rise in lot size over the quarter, but down for
the year as a whole
Investment activity by lot size
Source DTZ Research
17
19
Growth in domestic investment
European investment activity by source of capital
Source DTZ Research
18
20
But non-European investors remain net-buyers
Net investment by source of capital
Source DTZ Research
19
21
Listed property companies less active on the
buy-side
Investment activity by investor type
Source DTZ Research
20
22
and become net sellers in Q4
Net investment by investor type
Source DTZ Research
21
23
Growth in office investment and retail holds
steady over the year
European investment activity by sector
Source DTZ Research
22
24
Uncertainty could push volumes lower in 2012
European investment volume forecast
Source DTZ Research
23
25
Agenda
  • European overview
  • European property market recent trends and
    forecasts
  • Capital market trends
  • European scenario analysis

26
Why do scenario analysis?
  • This is NOT our base case forecast, which shows
    continued recovery
  • But, many market participants focused on managing
    downside risks
  • Scenario analysis helps quantify the downside for
    office markets
  • Using a four-step approach in our scenario
    analysis
  • Define the downside economic scenario
  • Measure impact across 45 European office occupier
    markets
  • Take into account yield impact and quantify total
    return change
  • Use DTZ Fair Value Index methodology to assess
    attractiveness

27
European scenario analysis assumptions
  • Base case probability 45, break-up scenario
    probability 10. Supplied by Oxford Economics,
    Jan 2012
  • Disorderly defaults in Greece, Portugal and
    Ireland which hit banks hard, particularly in
    France and Germany
  • Business and consumer confidence fall, firms cut
    back on investment, labour markets weaken and
    economies across Europe are plunged back into
    recession
  • Authorities hold interest rates at record lows
    for an extended period
  • Impact of crisis reaches well beyond the borders
    of the Single Currency bloc, tipping the UK back
    into recession as well.

26
28
Euro-zone break-up scenario prompts deep
recession in Europe
EU27 GDP
y/y
2012-16
Average pa
Base case 1.8
Scenario 1.0
  • Euro-zone to break up
  • Greece, Ireland, Italy, Portugal and Spain leave
    single currency
  • Banks suffer heavy losses

Source DTZ Research, Oxford Economics
27
29
Nordics/UK/Emerging Europe hold up better than
Eurozone
GDP, 2012-2016
2012 pa
Spain -4.6
Italy -4.2
Ireland -4.0
Belgium -3.9
EU 27 -2.0
France -1.6
Netherlands -1.5
Finland -1.5
Eurozone -1.3
Sweden -1.1
Germany -0.7
UK -0.7
Poland -0.3
Turkey -0.2
Russia 0.1
pa
Source DTZ Research, Oxford Economics
Eurozone markets in grey
28
30
Euro break-up scenario sees rental declines in
many markets
Prime rents pa 2012-2016
Source DTZ Research
29
31
Risk aversion and recession push yields higher
under euro break-up
European prime yields by sector
Source DTZ Research
30
32
Euro break-up results in capital value declines
in some markets
Prime capital values 2012-2016
Cumulative change
Source DTZ Research
31
33
Property TimesEurope Offices
34
Property TimesEurope Logistics
35
European Retail Guide
36
Thank you for your attention
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