tim luckman, director of valuation advisory, jll
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The Investment Market
Tim LuckmanDirector, Valuation Advisory5 February 2014
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Agenda• Economy
• Investment trends
• Office sector
• Industrial sector
• Retail and leisure sector
• Conclusions
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Economy
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UK Confidence IndicatorsOptimism at post-crisis high
Source: European Commission, October 2013
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Economic GrowthEurozone leads the downswing in 2012
GDP % YoY 1990-2017
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
YoY%UK Eurozone World
Source: Oxford Economics,
Forecasts
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Investment Trends
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Current Trends – UK Investment Activity
2008 2009 2010 2011 2012 2013£0
£5,000
£10,000
£15,000
£20,000
£25,000
£30,000
£12,491 £12,143
£17,303£16,447
£22,253
£25,210
£6,505£8,036
£11,560£10,791
£15,379
£18,378
£341.15 £150.04 £371.98 £393.68 £156.87 £414.47
Investment by Region
United Kingdom London Manchester
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Current Trends – Who are the vendors ?
43%
3%7%
30%
3% 13% Institutions / Pooled Funds
Private Investor
Propco's
Insolvency / Consensual
Unknown
Other
Source: Jones Lang LaSalle, 2013
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Current Trends – Who are the purchasers?
33%
67%
Source: Jones Lang LaSalle, 2013
33%UK
67%Global 2013 (£m)
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UK DomesticAmerica
Global
Asia Pacific
Middle East
Europe
Global Sources of Funds
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Offices
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Key Messages | Q4 2013
• Big 6 take-up totals 4.3m sq ft in 2013, up 35% compared to 2012
• Manchester & Leeds account for the biggest share of take-up across the Big 6
• Big 6 supply down 15% since end 2012 - to 10.1 million sq ft
• Average overall vacancy rate of 9.4%, across the Big 6
• Grade A supply severely constrained – further tightening expected in the short term
• 1.0 million sq ft under construction across the Big 6, of which almost half is in Glasgow
• Prime rents increase in a number of markets in Q4 2013
• The weight of money targeting the regions continues to place inward pressure on yields
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000 Take-up 5 Year Average000s sq ft
Manchester City Centre Take-upSolid performance in terms of leasing activity
Source: Jones Lang LaSalle, 2014
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
500
1,000
1,500
2,000
2,500
3,000
0%
2%
4%
6%
8%
10%
12%
14%Supply (LHS) Vacancy Rate (RHS)000s sq ft
Manchester SupplySupply down 9% since end 2012
Source: Jones Lang LaSalle, 2014
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Manchester Speculative Development | Q4 2013
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
000'
s sq
ft
Completed U/C Definite Spec Start Likely Spec Start 50/50 Spec Start
Source: Jones Lang LaSalle 2014
Just one scheme currently under construction
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Big 6 Investment Volumes by Purchaser Nationality
2008 2009 2010 2011 2012 20130
200
400
600
800
1000
1200
1400
UK Overseas Undisclosed
Source: Jones Lang LaSalle 2014
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Long Term Prime Average Yields – UK Cities
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Dec
-87
Dec
-88
Dec
-89
Dec
-90
Dec
-91
Dec
-92
Dec
-93
Dec
-94
Dec
-95
Dec
-96
Dec
-97
Dec
-98
Dec
-99
Dec
-00
Dec
-01
Dec
-02
Dec
-03
Dec
-04
Dec
-05
Dec
-06
Dec
-07
Dec
-08
Dec
-09
Dec
-10
Dec
-11
Dec
-12
Dec
-13
Pri
me
Yie
ld %
Regional preferred West End WE Average City City Average
Regional London City London West End
Prime Yield 6.00% 4.75% 3.75%
10 Year Average 6.23% 5.38% 4.37%
Long term Average 5.94% 5.54% 4.72%
Source: Jones Lang LaSalle 2014
Prime UK regional yields nearing long term average levels
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UK Prime Office Yields
Source: Jones Lang LaSalle, 2014UK excl. London: Birmingham, Bristol, Cardiff, Leeds, Edinburgh, Manchester, Glasgow & Western Corridor
Prime yields trend keener4Q
03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
3%
4%
5%
6%
7%
8%
9%UK incl. London UK excl. London
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One Angel Square, £142mDecember 2012
REEF Estates/ Ginko Tree Investments, 6 %
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100 Barbirolli Square, £41mJune 2013
Moorfield and Oaktree Capital Management, 8.75 %
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1 Hardman Street £7mDecember 2013
Charles Street Buildings Group, 5.4%
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Scottish Widows Investment Partnership, 6.25 %
Sunlight House, £34.5m, January 2014
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Industrial
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Industrial Market – Current themes
Occupational - Distribution• Good levels of take up • Grade A Supply continues to diminish • Strong demand from retailers • Return of speculative development in prime locations
Occupational - Estates• Demand and supply vary according to local micro markets• Limited new supply is hampering demand• Industrial land continues to suffer pressure from higher value uses• Increase in activity from occupiers catering for online retail fulfilment particularly parcel carriers
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Property Market Overview: Yields as at January 2014
Single-let
Prime London 5.50%
South East 5.75%
Regions 6.00%
Multi-let
Prime London 5.50%
South East 5.75%
Regions 6.75%
Sentiment Supply Yield
• Positive sentiment
• Good occupational story
• Limited stock
• Depth of investors
• Yields down
• Asset class still looks good value
• Strong demand will continue
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Standard LifeInvestments, 5.6 %
Travis Perkins, Omega North, £52.8mOctober 2013
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Titan 350, £15mJanuary 2014
Delin, 7.5 %
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Retail and Leisure
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3.04.05.06.07.08.09.0
10.011.012.0
Mar
-91
Mar
-01
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Dec
-07
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Nov
-12
Mar
-13
Jun-
13Se
p-13
Nov
-13
Retail Warehouse / Leisure Investment Yields
Open A1 Parks (Fashion) 5.25% (Stronger)
Restricted Parks (Bulky) 6.00% (Stable)
Solus Bulky / DIY 6.25% (Stable)
Secondary RW 7.25% (Stable)
Foodstores 4.25% (Stronger)
Leisure 6.00% (Stable)
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The Circus, £24.45mJanuary 2014
CBRE GlobalInvestors, 5.7%
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Great Northern £71.1 mSeptember 2013
Confidential
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Conclusions
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SE will remain expensive
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Who are and will be the purchasers?2013–2015
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AND FINALLY…
• Occupational markets continue to improve
• Rental growth
• More speculative development
• Further compression of yields
• Gap between prime and secondary continues to narrow
• More availability of debt BUT CAUTION – debt more expensive!
• Generally, 2014 another strong year
January – What a month!
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Questions
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014
Tim LuckmanDirector, Valuation AdvisoryOne Piccadilly Gardens Manchester M1 [email protected] 828 6426