Emerging Trends in Real Estate® Europe 2012 - PwC
Emerging Trends in Real Estate® Europe 2012 - PwC
Emerging Trends in Real Estate® Europe 2012 - PwC
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have so much choice that they will price accord<strong>in</strong>gly. What’s<br />
more, they will be able to go wherever they want.”<br />
However, respondents do th<strong>in</strong>k that although the situation<br />
may be “difficult, it is not hopeless.” They express some optimism<br />
that the Czech Republic will benefit from the grow<strong>in</strong>g<br />
divide between the north and south of <strong>Europe</strong>, fall<strong>in</strong>g <strong>in</strong>to the<br />
safer north camp. Optimism also exists that Prague will benefit<br />
from an <strong>in</strong>creased focus on this area of <strong>Europe</strong> long term,<br />
ow<strong>in</strong>g to the success of Warsaw.<br />
Interviewees also mentioned the <strong>in</strong>creas<strong>in</strong>g prom<strong>in</strong>ence<br />
of wealthy local families and entrepreneurs <strong>in</strong> the market.<br />
“Successful local players have brought real estate to the front<br />
of people’s m<strong>in</strong>ds. Czech companies and families are becom<strong>in</strong>g<br />
serious property <strong>in</strong>vestors. Fifteen years of profits from<br />
different bus<strong>in</strong>esses represents a lot of firepower. This money<br />
is real and will cont<strong>in</strong>ue to grow. Moreover, they have relationships<br />
with local banks and can raise f<strong>in</strong>anc<strong>in</strong>g.”<br />
Regional Cities: Lyon (16) and Ed<strong>in</strong>burgh<br />
(17). While they are well down the list, both Lyon and<br />
Ed<strong>in</strong>burgh have done better <strong>in</strong> the rank<strong>in</strong>gs this year for<br />
both new <strong>in</strong>vestment prospects and development prospects<br />
(although their overall scores were lower relative to last year,<br />
as shown <strong>in</strong> exhibits). While Ed<strong>in</strong>burgh did better for exist<strong>in</strong>g<br />
<strong>in</strong>vestment prospects, Lyon dropped one place.<br />
Although conditions <strong>in</strong> regional cities are still tough, this mild<br />
boost has been brought about because some <strong>in</strong>vestors are<br />
beg<strong>in</strong>n<strong>in</strong>g to search for value growth and opportunities outside<br />
of London and Paris, where competition is strong and prices<br />
are high. Investment activity <strong>in</strong> Ed<strong>in</strong>burgh <strong>in</strong> recent months has<br />
attracted bids from pan-<strong>Europe</strong>an <strong>in</strong>vestment managers and<br />
U.K. real estate <strong>in</strong>vestment trusts. But l<strong>in</strong>ger<strong>in</strong>g fear over how<br />
austerity measures, public sector cuts, and economic weakness<br />
will <strong>in</strong>crease the divide between prosperity <strong>in</strong> capital cities<br />
and the regions means that, for now, <strong>in</strong>vestors are still focused<br />
on the best assets or the best-located assets <strong>in</strong> city centres.<br />
“Someth<strong>in</strong>g well located and multi-let would be attractive<br />
<strong>in</strong> cities where there is restricted supply. We like Glasgow and<br />
Ed<strong>in</strong>burgh as they are hold<strong>in</strong>g up quite well.” “In France, it is<br />
about Paris, Lyon, and Marseille. Everyth<strong>in</strong>g located outside<br />
of these big cities will struggle to perform well.” “I would <strong>in</strong>vest<br />
<strong>in</strong> Marseille, Bordeaux, and Lyon, but only if I can do the<br />
right project.” “It is about buy<strong>in</strong>g <strong>in</strong>come with opportunities to<br />
reta<strong>in</strong> exist<strong>in</strong>g tenants and improve the build<strong>in</strong>g.” “I am open<br />
to <strong>in</strong>vest<strong>in</strong>g <strong>in</strong> smaller cities as long as the fundamentals are<br />
correct.” “If you go to regional markets, don’t compromise on<br />
build<strong>in</strong>g quality. It has to be centrally located with good transport<br />
l<strong>in</strong>ks. And look for tenant commitment.”<br />
Interviewees expected no rental growth <strong>in</strong> Ed<strong>in</strong>burgh this<br />
year, although it fell <strong>in</strong> 2010, and landlords have reported rentfree<br />
<strong>in</strong>centives <strong>in</strong>creased to three years on a ten-year lease.<br />
Lyon has a diverse occupier base and is home to <strong>in</strong>ternational<br />
headquarters for occupiers such as Interpol. Latest research<br />
reported a slowdown <strong>in</strong> leas<strong>in</strong>g activity dur<strong>in</strong>g the third<br />
Chapter 3: Markets and Sectors to Watch<br />
quarter of 2011 and flat rental growth, although no <strong>in</strong>crease <strong>in</strong><br />
<strong>in</strong>centives, which rema<strong>in</strong> at six months for a six- to n<strong>in</strong>e-year<br />
lease, accord<strong>in</strong>g to Jones Lang LaSalle.<br />
ExHIBIT 3-21<br />
Lyon<br />
Source: <strong>Emerg<strong>in</strong>g</strong> <strong>Trends</strong> <strong>in</strong> <strong>Real</strong> Estate <strong>Europe</strong> <strong>2012</strong> survey.<br />
Prospects Rat<strong>in</strong>g Rank<strong>in</strong>g<br />
Exist<strong>in</strong>g Property Performance Fair 2.92 16<br />
New Property Acquisitions Fair 2.84 16<br />
Development Prospects Poor 2.49 16<br />
Investment Prospects<br />
excellent<br />
good<br />
fair<br />
poor<br />
abysmal<br />
2005<br />
2006<br />
ExHIBIT 3-22<br />
Ed<strong>in</strong>burgh<br />
2007<br />
2008<br />
2009<br />
Source: <strong>Emerg<strong>in</strong>g</strong> <strong>Trends</strong> <strong>in</strong> <strong>Real</strong> Estate <strong>Europe</strong> <strong>2012</strong> survey.<br />
2010<br />
2011<br />
<strong>2012</strong><br />
Prospects Rat<strong>in</strong>g Rank<strong>in</strong>g<br />
Exist<strong>in</strong>g Property Performance Fair 2.72 17<br />
New Property Acquisitions Fair 2.70 20<br />
Development Prospects Poor 2.38 17<br />
Investment Prospects<br />
excellent<br />
good<br />
fair<br />
poor<br />
abysmal<br />
2005<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
2011<br />
<strong>2012</strong><br />
Amsterdam (19) and Brussels (20). Both cities<br />
scored lower <strong>in</strong> the city rank<strong>in</strong>gs this year and rema<strong>in</strong> towards<br />
the bottom end of the <strong>Europe</strong>an cities league table for two<br />
years runn<strong>in</strong>g. One <strong>in</strong>terviewee summarised the prospects of<br />
both thus: “Amsterdam [and Rotterdam] are both catastrophic<br />
<strong>Emerg<strong>in</strong>g</strong> <strong>Trends</strong> <strong>in</strong> <strong>Real</strong> Estate ® <strong>Europe</strong> <strong>2012</strong><br />
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