Emerging Trends in Real Estate® Europe 2006 - Urban Land Institute

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Investors rate Copenhagen as the city with the lowest risk of any in the survey. cities, which are benefiting from the overspill of competition in Paris. Office property yields in Lyon at 7.5 percent are still 160 basis points above Paris at 5.1 percent. It is a smaller, less liquid market, but respondents have the confidence to believe that development with some preletting will be possible in 2006. While Lyon is perceived as being somewhat risky, over 60 percent of survey respondents recommend buying office, retail, and/or industrial properties in Lyon in 2006, making it one of the favourite “buy” markets in Europe. Copenhagen Copenhagen has moved into the elite top ten market rankings in 2006 from the middle of the pack last year. Falling yields, fundamental improvements, and optimism regarding employment growth in 2006 fuel positive expectations that flat prime rents in 2005 will improve in 2006. Investors also rate Copenhagen as the city with the lowest risk of any in the survey, which significantly bolstered its rating. Positive economic growth is sustaining property market demand and foreign investment is visible in the market. Retail properties attracted foreign investors in 2005 with continued interest in 2006. The hold recommendation for industrial at 71.4 percent is the highest among all property markets, and the hold recommendation for office is high as well, with office vacancy at a fairly low 7.2 percent. Exhibit 3-11 Prospects for the Copenhagen Real Estate Market in 2006* Prospects Rating Ranking Risk-Adjusted Total Returns Modestly Good 5.7 9th Total Returns Fair 5.0 21st Risk Low 6.5 1st Rent Increases Fair 4.9 13th Capital Growth Fair 5.2 20th Supply/Demand Balance Modestly Poor 4.0 25th Development Modestly Poor 4.0 27th Investment Recommendation of Survey Respondents Office Retail Industrial/ Distribution Buy Hold Sell 28% 56% 17% Buy Hold Sell 37% 44% 19% Buy Hold Sell 14% 71% 14% Source: Emerging Trends in Real Estate Europe 2006 survey. * Fewer than 20 (but no fewer than 14) survey respondents rated this city on some measures. 36 Emerging Trends in Real Estate ® Europe 2006 Edinburgh Edinburgh rounds out the top ten favourite markets—the same ranking it held in 2005. In 2006, Edinburgh’s office market will experience the full impact of its reaction to an oversupply problem dating back to 2000. No new buildings will be completed in the city in 2006, giving Edinburgh a driver for short- and medium-term rental growth. However, next year also depends on how demand fares. The market had an expectation of improved take-up in 2005, but this is proving premature as demand was down 40 percent compared with the same levels in 2004. Office yields stood around 5.5 percent in late 2005. German investors have been active in the city for more than a decade and they continue to head a cosmopolitan mix of players. There is little the city can do to satisfy the weight of money it experiences. It is a tighter market than more traditional U.K. locations and, as such, has a stronger disposition towards owner occupation. Exhibit 3-12 Prospects for the Edinburgh Real Estate Market in 2006 Prospects Rating Ranking Risk-Adjusted Total Returns Modestly Good 5.7 10th Total Returns Fair 5.4 14th Risk Modestly Low 6.0 7th Rent Increases Fair 5.2 11th Capital Growth Fair 5.4 12th Supply/Demand Balance Fair 4.8 17th Development Fair 5.0 20th Investment Recommendation of Survey Respondents Office Retail Industrial/ Distribution Buy Hold Sell 36% 57% 7% Buy Hold Sell 24% 44% 32% Buy Hold Sell 20% 64% 16% Source: Emerging Trends in Real Estate Europe 2006 survey. On the retail side, a dearth of opportunities for large floor plate retailers is holding the city back compared with competitors such as Glasgow. The city is considering for a second time a big-bang solution at Waverly Station, but this is in its early days yet. The market is well liked overall in our survey, coming in tenth, but on an individual-sector level there is more scepticism over its place as a buy city, with most recommending holding.
Exhibit 3-13 Office Property Buy/Hold/Sell Recommendations by City Helsinki 65.2 Moscow 65.2 Lyon 64.1 Madrid 60.8 Istanbul 60.0 Paris 53.3 London 52.6 Budapest 51.5 Prague 48.4 Barcelona 47.8 Stockholm 47.8 Athens 47.8 Munich 45.5 Milan 44.2 Warsaw 43.2 Hamburg 40.0 Edinburgh 35.7 Rome 31.3 Brussels 28.1 Copenhagen 27.8 Lisbon 27.3 Frankfurt 26.3 Berlin 25.0 Dublin 21.7 Vienna 20.0 Amsterdam 17.2 Zurich 13.3 Buy % 43.8 46.9 55.6 48.5 36.8 43.2 43.5 60.0 55.2 53.3 Hold % Sell % 0% 20% 40% 60% 80% 100% Source: Emerging Trends in Real Estate Europe 2006 survey. The Middle-Ranked Markets Prague Prague comes in at the 11th ranking in this year’s survey, with fairly strong total return prospects but some investor concern about risk. Prague also offers one of the better development outlooks in Europe, ranking seventh on this measure. 38.3 33.3 36.4 38.7 41.3 43.5 43.5 45.5 44.2 35.1 40.0 57.1 30.4 26.1 28.2 27.5 32.0 4.3 8.7 7.7 11.8 8.0 8.3 14.0 12.1 12.9 10.9 8.7 8.7 9.1 11.6 21.6 20.0 7.1 25.0 25.0 16.7 24.2 36.8 31.8 34.8 20.0 27.6 33.3 Exhibit 3-14 Retail Property Buy/Hold/Sell Recommendations by City Istanbul 85.2% Prague 74.2% Budapest 68.8% Lyon 68.4% Helsinki 65.0% Athens 63.6% Moscow 61.9% Paris 61.1% Munich 60.0% Hamburg 58.3% Barcelona 55.3% Madrid 54.9% Berlin 53.3% Rome 52.9% Milan 51.3% Warsaw 50.0% Stockholm 45.0% Frankfurt 41.0% Lisbon 38.2% Copenhagen 37.5% Zurich 37.5% Brussels 35.5% Vienna 33.3% Amsterdam 25.0% London 24.1% Edinburgh 20.7% Dublin 20.0% Buy % 60.7 44.4 55.2 55.0 Hold % Sell % 0% 20% 40% 60% 80% 100% Source: Emerging Trends in Real Estate Europe 2006 survey. Office vacancy rates decreased in 2005 to the lower teens from the mid teens in 2004 due to information technology and business service positive take-up. Respondents’ office buy recommendation decreased from 73 percent in 2005 to 48 percent in 2006, indicating that a larger percentage of 45.0 48.7 44.1 43.8 56.3 51.6 55.6 11.1 19.4 25.0 23.7 30.0 31.8 28.6 35.2 31.4 33.3 34.0 27.5 37.8 29.4 35.9 36.1 Emerging Trends in Real Estate ® Europe 2006 37 3.7 6.5 6.3 7.9 5.0 4.5 9.5 3.7 8.6 8.3 10.6 17.6 8.9 17.6 12.8 13.9 10.0 10.3 17.6 18.8 6.3 12.9 11.1 14.3 31.5 24.1 25.0
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Page 19 and 20: c h a p t e r 2 There is thwarted c
Page 21 and 22: Exhibit 2-3 Change in Availability
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Page 25 and 26: Exhibit 2-6 Gross Asset Value (GAV)
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Page 43 and 44: in 2006. Exhibit 3-17 Prospects for
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Page 47 and 48: Exhibit 3-25 Prospects for the Vien
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Page 53 and 54: c h a p t e r 4 Retail continues to
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Page 57 and 58: in the survey. Exhibit 4-8 Prospect
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Page 67 and 68: IMN Conferences Imometrica Antonio
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