EURO CITIES Analysis of the European property market Spring 2019 - International alliance partners - AS Fahrschule GmbH Achern
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EURO CITIES
Analysis of the European property market
Spring 2019
International
alliance partners
Euro Cities
INTRODUCTION
Welcome to the 2019 edition of Gerald Eve’s Euro Cities report. Market reports
Gerald Eve continues to expand and strengthen its international
alliance to offer our clients a best-in-class service. At the time of Introduction 3
writing, Brexit has not come to a conclusion, with no agreement on
the withdrawal deal by the British parliament. This has rightly caused Overview 4
concern in many European countries and we have seen lowered Austria Vienna 8
growth rates and heightened talk of recession.
Belgium Antwerp 10
There is also unrest with the ‘gilet jaunes’ protests in France, strikes Brussels
in Portugal and disagreements between various EU members. Czechia Brno 12
This is set against the backdrop of global uncertainty as relationships Prague
between Russia, the USA, and China worsen and the threat of
protectionism and potential trade wars escalate. Denmark Copenhagen 14
France Lyon 16
Despite all of the above, demand for good quality office space Paris
remains high, driven by the expansion of the media and technology
sector. Industrial properties are also in high demand across Europe, Germany Berlin 18
with changing consumer shopping habits leading to an increase in Düsseldorf
e-commerce, at the expense of the retail sector. Frankfurt
Hamburg
We hope that you find this report both useful and interesting, and Munich
in this ever-changing environment where opportunities need to be Ireland Dublin 22
grasped, we remain available to assist with your international
property needs. Italy Rome 24
Milan
Luxembourg Luxembourg City 26
Netherlands Amsterdam 28
Rotterdam
Patricia LeMarechal Norway Oslo 30
Partner
Poland Warsaw 32
Tel. +44 (0)20 7653 6851 Wrocław
plemarechal@geraldeve.com
Portugal Lisbon 34
Slovakia Bratislava 36
Spain Barcelona 38
Madrid
Turkey Istanbul 40
United Kingdom Belfast 42
Birmingham
London
Manchester
Page 3
Euro Cities
OVERVIEW
Economy
The growth of the European economy continued to be weak in 2019 will also see further growth in fixed investment. Spending on
comparison to previous years, and whilst economists thought this machinery and equipment should continue to be supported by
could potentially accelerate towards the end of 2018, the sluggish tight capacity and ongoing improvement in bank lending flows to
performance of the German economy, which almost fell into non-financial firms. Activity in construction and real estate is also
recession in the second half of 2018, dashed any hopes of this. picking up strongly across many countries, further boosting
total investment.
Oxford Economics believe that the eurozone slowdown is being
partially driven by transitory factors, namely the German auto Eurozone exports were hit hard in 2018 by the worsening global
industry and more recently the ‘gilet jaunes’ protests in France, and environment, with risks posed by rising protectionism and a
as a result, some recovery will be seen. However, leading indicators potential trade war with the US affecting sentiment and orders.
still suggest that momentum in the eurozone remains weak moving In addition, the troubles in the car industry have also exacerbated
into 2019, and GDP is forecast to expand by only 1.5%. the impact, especially in Germany. However, there seem to be signs
of stabilisation in global trade volumes, and the lagged impact from
The growth in GDP in 2019 will largely be driven by an increase the strong euro appreciation in 2017 should fade.
in household spending. The recovery in eurozone labour markets
continues but, with the unemployment rate down to a decade- However there are various downside risks which could impact
low of 7.9%, the pace of job creation is now slowing. Consumer investor sentiment. Potentially interest rates could rise more
spending weakened in 2018 as households felt the impact of rising aggressively than expected, which would put an upward pressure
inflation on disposable incomes, but lower inflation this year should on yields.
provide a welcome boost to real incomes.
The potential of rising interest rates, combined with the fact that
Additionally, the fall in the unemployment rate should add an we are now late in the property cycle, has amplified the need for
upward pressure on wage growth which will provide further support secure, long-term income. As a result, many investors will trade
to household spending. capital growth, which is limited, for rental stability and growth.
Eurozone: Consumption and real income All property European investment performance
Sources: Oxford Economics, Haver Analytics Sources: MSCI, Gerald Eve
% y/y %
4 14
Forecast
12
3
10
2 8
6
1 4
0 2
0
-1 -2
-4
-2
-6
-3 -8
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2006
2007
2018
2019
2020
2021
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Household spending Real disposable income Income Return Capital Growth Total return
Page 4
Euro Cities
Brexit
Eurozone GDP growth of 1.5% assumes the successful implementation
of the withdrawal agreement, meaning that after the UK formally leaves
the EU in March 2019 there is then a 21-month transition period
where trading arrangements remain unchanged. However, there is an
increasingly large risk that the process is derailed by the UK parliament
failing to approve the deal.
In the scenario where no deal can be agreed (and put through UK
Parliament), additional trade frictions and a sizeable depreciation of
sterling would cause a significant slowdown in the UK economy, and
to a lesser extent, other EU countries.
Europe: Impact on GDP of ‘no deal’ Brexit
Source: Oxford Economics
UK -2.1
Ireland -1.4
Poland -0.8
Czech Republic -0.7
Slovakia -0.6
Denmark -0.6
Greece -0.6
Sweden -0.4
Finland -0.3
Portugal -0.3
Hungary -0.3
Belgium -0.3
Netherlands -0.2
Italy -0.2
Spain -0.2
France -0.2
Germany -0.2
Austria -0.1
Croatia -0.1
Romania -0.1
Bulgaria -0.0
-2.5 -2.0 -1.5 -1.0 -0.5 -0.0
Eurozone: Contributions to GDP growth Total return by sector
Source: Oxford Economics Sources: MSCI, Gerald Eve
% %
3 20
Forecast
18
2 16
14
1
12
10
0
8
6
-1
4
-2 2
0
-3 -2
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Spain
Netherlands
Czechia
Portugal
Germany
France
Ireland
Belgium
Austria
Poland
Denmark
UK
Italy
Norway
Net exports Government spending Consumption Industrial Office Retail
Stockbuilding Investment GDP
Page 5
Euro Cities
Offices Industrial
Despite the weakening expansion of the economy, occupier sentiment Industrial assets have been the best performing over the last 12
for office space across Europe remains positive with similar levels months in terms of investment performance, with an increasing level
of leasing activity expected this year. Oxford Economics forecast an of demand coming from both occupiers and investors. The growth of
additional 2.8 million office-based jobs created over the next five years online shopping across Europe has been the main driver of demand
within the European Union (excluding the UK), which will help maintain with occupiers focussing on last mile logistics.
a strong demand for new space.
Demand in 2019 is expected to increase, with the online sale of
The continued expansion of the media and technology sector groceries becoming increasingly more viable due to increased supply
continues to be one of the main drivers of leasing activity for many chain efficiency, improved automation and temperature-controlled
European markets with Oxford Economics forecasting a 1.6% rise in last mile storage. The UK has already seen the benefit of this, with
EU-28 technology sector employment in 2019. company’s such as Deliveroo able to set up “dark kitchens”, where
the production of meals as well as the transport is outsourced
Occupiers continued demand for office flexibility will lead to greater to the logistics operator.
growth in the serviced office sector across Europe. As well as more
flexible leases, and the ability to take space almost instantly, serviced Smaller industrial units are also becoming more popular and will add
offices at the top end of the market have put a lot of emphasis on to the demand for space in 2019. The growth of this segment has
improving the user experience of the occupier, which includes the largely been driven by an increasing level of demand coming from
refinement of wellness programmes and provision of an expanded small and medium-sized companies, but these units are also far more
range of employee services and amenities. The improved package suited to city logistics operations, where space is more limited, than
offered from this sector will lead to more occupiers abandoning larger units.
traditional office space, and ultimately increasing the demand for
serviced offices. A combination of increased demand for industrial units, and limited
available land for development, has resulted in a fall in the overall
In 2018, there was a flight to quality from occupiers, as real estate availability rate making it more difficult for occupiers to find the suitable
more than ever before, was used to attract and retain the best talent. space. Likewise, transaction volumes may also reduce due to a lack
As a result, there is currently a short supply of prime grade A office of available stock, and as a result prime yields will continue to fall in
space across most of Europe’s leading cities. It has also led to an the most competitive markets, as well as further rental growth being
increasing level of pre-letting activity, with many of Europe’s largest achieved this year.
developments now becoming fully let on completion.
Office rental value growth, 2017 Industrial investment performance, 2017
Source: MSCI, Gerald Eve Source: MSCI, Gerald Eve
% %
8 30
7
25
6
5 20
4
15
3
10
2
1 5
0
0
-1
-2 -5
Barcelona
Oslo
Madrid
Berlin
Copenhagen
Dublin
Munich
Hamburg
Amsterdam
Paris
Düsseldorf
London
Manchester
Vienna
Lisbon
Birmingham
Frankfurt
Rotterdam
Lyon
Brussels
Warsaw
London
Madrid
Birmingham
Munich
Berlin
Prague
Barcelona
Manchester
Düsseldorf
Frankfurt
Hamburg
Dublin
Warsaw
Copenhagen
Lisbon
Amsterdam
Paris
Rental growth Income Return Capital Growth Total return
Page 6
Euro Cities
OFFICE AND INDUSTRIAL
PRIME RENTS AND YIELDS
504
Office Rent
131
Industrial Rent
3.8
Office Yield
5.0
Industrial Yield
NORWAY
1,312
Office Rent
179
Industrial Rent
268
Office Rent
87
Industrial Rent
3.5
Office Yield
3.5
Industrial Yield
3.8
Office Yield
5.8
Industrial Yield
UNITED KINGDOM
375
Office Rent
65
Industrial Rent
DENMARK
288
Office Rent
42
Industrial Rent
3.3
Office Yield
6.6
Industrial Yield
4.8
Office Yield
6.0
Industrial Yield
700
Office Rent
100
Industrial Rent NETHERLANDS 492 84 POLAND
Office Rent Industrial Rent
4.0 5.3 3.0 4.3
Office Yield Industrial Yield
310 55 Office Yield Industrial Yield
IRELAND
Office Rent
4.5
Industrial Rent
192 48
5.5 GERMANY Office Rent Industrial Rent
Office Yield Industrial Yield
6.3
Office Yield
7.0
Industrial Yield
BELGIUM 600
Office Rent
SLOVAKIA
4.0
810
Office Rent
47
Industrial Rent
Office Yield
LUXEMBOURG
3.2
Office Yield
4.8
Industrial Yield
258
Office Rent
62
Industrial Rent
4.8 5.5
FRANCE 312
Office Rent
70
Industrial Rent
Office Yield Industrial Yield
3.8
Office Yield
5.5
Industrial Yield
CZECHIA
AUSTRIA
264 51 570
Office Rent
Office Rent Industrial Rent
4.5 284 42
4.5 6.5 Office Yield
Office Rent Industrial Rent
Office Yield Industrial Yield
408 81 6.0
Office Yield
10.0
Industrial Yield
Office Rent Industrial Rent ITALY
PORTUGAL
3.5
Office Yield
5.8
Industrial Yield
TURKEY
SPAIN
Office Rent / Yield
Industrial Rent / Yield
Euro per sq m (Annual)
Page 7
Frankfurt Prague
Austria Ostrava
Nuremberg
Brno
8,766,201
Population Stuttgart
417 Bratislava
Munich
GDP (US $bn)
Vienna
Salzburg
3
Average cost per pint (Euro)
Innsbruck Graz
1,110
Annual rainfall (mm per year)
9
Airports
4
Ports
Milan
Venice
Turin Verona
Commentary
Austria’s strong economic performance in 2017 carried on into the The office market is expected to remain stable as we move through
first half of 2018 and as a result, overall GDP growth is expected to 2019, although a slight decrease in occupier demand is anticipated.
reach 2.9%, a slight increase on the previous year. The main driver
behind this growth has come from strong domestic demand, thanks A number of development schemes in Vienna were delivered in
to a rise in consumer spending. This was due to favourable labour 2018, adding a further 230,000 sq m of new space to the market,
market conditions and increasing wages. In addition, after several however this rate of activity will drop in 2019, with only 40,000 sq m
years of subdued growth, the construction sector rebounded in of new space expected to be completed over the next 12 months.
2017 and has remained firm in 2018. Despite the fall in activity, investor sentiment remains strong for offices
in Vienna, particularly from international investors, with increasing
The second half of 2018 was not quite as strong however, due to a interest coming from the UK, USA and Asia.
slight reduction in demand from international markets. Against the
backdrop of the weaker economy in the Eurozone and the growing The logistics market continues to be on the rise in Austria, and this
uncertainty in the economic environment, a further slowdown in the trend is expected to continue throughout 2019. Development activity
domestic rate of expansion is expected. continues to grow in the greater Vienna region, as well as in the
secondary cities of Graz and Linz. Developers have been encouraged
Overall, GDP growth is forecast in 2019 and 2020 to grow more by the strong demand from investors, as well as the rate of leasing for
moderately at 2.0% and 1.8%, respectively. new high quality grade A space.
Annual employment levels continued to grow throughout 2018, There has also been an increase in e-commerce activity, and as a
leading to a fall in unemployment. However, whilst employment is result, Amazon is about to start its first warehouse in the greater
still expected to grow, the rate of increase will begin to slow down Vienna area with further warehouses to follow in 2019 and 2020. This
in 2019 and 2020, in line with the broader economy. Overall the rise in e-commerce activity has been driven by increasing wages and
unemployment rate is forecast to fall from 4.8% in 2018, to 4.4% strong domestic demand.
in 2020.
Austria Austria
Andreas Polak-Evans Sebastian Scheufele
Modesta Real Estate Modesta Real Estate
Tel. + 43 676 607 32 60 Tel.+43 676 940 29 49
evans@modesta.at scheufele@modesta.at
Page 8
Vienna
OFFICES
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
350 4.10
300
4.05
250
4.00
200
150 3.75
100
3.70
50
0 3.65
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
CBD North (Heiligenstadt) Prime yield
Inner districts North-East (Donau City)
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
LOGISTICS
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
80 6.6
70 6.4
60 6.2
50 6.0
40 5.8
30 5.6
20 5.4
10 5.2
0 50
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Vienna North/East Vienna and surroundings
Vienna South/West Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
Bremen
Belgium Amsterdam
Bielefeld
The Hague Münster
11,562,784 Rotterdam Dortmund
Population Essen
Düsseldorf
493 Antwerp
GDP (US $bn) Ghent Cologne
2
Brussels Bonn
Average cost per pint (Euro)
650
Annual rainfall (mm per year) Frankfurt
Luxembourg City
5
Airports
4
Ports Paris
Stuttgart
Commentary
GDP growth in Belgium grew by 1.5% in 2018, however despite Occupier sentiment for offices in Antwerp is also strong with further
positive net exports, a combination of weaker household spending high levels of leasing activity expected in 2019. The demand for
and public consumption growth are forecast to impact the economy new space is highlighted by the developments Link, and Post X
negatively, with GDP growth expected to be down to 1.2% by 2021, (130,000 sq m) which are almost fully let before completion.
in line with the euro area in general. Because of this demand, the availability rate is low at 8.7%,
and expected to remain at this level.
The current unemployment rate is low compared to recent history,
at 6.2%, however this differs significantly between regions; for Investor appetite for offices is strong, with transaction volumes
example, in Flanders where the rate is low, through to Wallonia reaching their highest levels over the last decade during 2018.
and Brussels where the rates are high. This is largely a result of
accessibility. Consumer confidence is also reported to be at its The Belgium logistics market is underperforming however, with
lowest level for over two years. companies such as WDP, Montea, VGP, and M&G Real Estate,
focussing their activities abroad. Leasing activity has been low, as a
Investment’s contribution to GDP growth is also expected to reduce result of mobility issues, high labour costs, and strict regulations on
slightly. This slowdown is on the back of lower capacity utilisation night work. Despite this, Alibaba plans to open a large distribution
and weakening exports. centre close to Liège airport, which will provide a significant boost
for the market.
The main risks to the Belgium economy over the next few years
are largely external, due to being a small open economy. These Retail property has also had an underwhelming year with weaker
risks include the potential impacts from a slowdown in demand in demand leading to an increase in overall availability. As a result, we’ve
Belgium’s main trading partners. seen prime rents across city centres begin to fall. Investment volumes
remain high however, due to the sale of three large shopping centres;
The Belgium office market has been performing relatively well namely Docks Bruxsel, Rive Gauche and W Shopping.
recently. In Brussels, the office sector recorded its lowest availability
rate since 2007 (8%), although the delivery of a number of
speculative developments could see this increase in 2019. Leasing
activity in Brussels was a little subdued in 2018, although serviced
offices such as Regus, Space and WeWork have become more
active and this could lead to an increase in demand for space.
Belgium Belgium
Ingrid Ceusters Hans Van Laer
Ceusters Ceusters
Tel. +32 475 47 49 95 Tel. +32 475 34 74 33
ingrid.ceusters@ceusters.be hans.vanlaer@ceusters.be
Page 10Euro Cities
Antwerp Brussels
OFFICES OFFICES
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
180 5.55 350 4.62
160 5.50 4.60
300
140 5.45 4.58
250
120 5.40 4.56
100 5.35 200 4.54
80 5.30 150 4.52
60 5.25 4.50
100
40 5.20 4.48
50
20 5.15 4.46
0 5.10 0 4.44
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Antwerp Prime yield EU Leopold Decentralised Prime yield
Pentagon Periphery
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
LOGISTICS LOGISTICS
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
56 6.10 55.5 6.10
55.0 6.00
54 6.00
54.5 5.90
5.90 54.0
52 5.80
53.5
5.80 5.70
50 53.0
5.70 5.60
52.5
48 5.50
5.60 52.0
51.5 5.40
46 5.50
51.0 5.30
44 5.40 50.5 5.20
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Antwerp Prime yield Brussels Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
RETAIL RETAIL
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
2500 3.55 2000 3.32
1800 3.30
3.50
2000 1600 3.28
3.45 1400
3.26
1500 3.40 1200
3.24
1000
3.35 3.22
1000 800
3.20
3.30 600
3.18
500 400
3.25
200 3.16
0 3.20 0 3.14
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Antwerp retail shops Antwerp retail warehouse Brussels retail shops Brussels retail warehouse
Antwerp shopping centre unit Prime yield Brussels shopping centre unit Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
Page 11Hanover Berlin
Warsaw
Czechia Lodz
Leipzig
Dresden Wroclaw
Czestochowa
10,630,589
Population
Katowice
216 Krakow
GDP (US $bn) Prague
Ostrava
1
Average cost per pint (Euro) Nuremberg Brno
677 Košic
Annual rainfall (mm per year)
18 Bratislava
Airports Munich Vienna
Salzburg
2
Ports Innsbruck
Graz
Commentary
An increase in domestic demand meant that the Czech Republic The South Moravian region continues to draw investor interest into
economy grew by 3.0% in 2018, which was a slight decrease on logistics warehouses. Currently, the availability rate is as low as
2017, the country’s highest growth in a decade at 4.3%. 4.7%, although this could soon rise with a number of developers
planning to expand their capacity in this region. For example Prologis
Investment gained momentum in 2018, boosted by the automation Park Brno (68,000 sq m), Panattoni Park Brno (106,000 sq m), and
needs in manufacturing and the surge of public investment CTPark Vyskov (25,000 sq m). These schemes will draw demand
supported by EU funds. Wage dynamics and consumer confidence from occupiers and as a result prime rents are expected to rise.
boosted private consumption, while increases in public salaries
lifted public expenditure. Conversely, net exports and inventories The real estate market in Prague continues to be strong as a
contributed negatively to year-on year growth. These dynamics are result of increased demand, combined with significant economic
expected to continue through 2019. growth. Over the last five years, as well as an increase in demand
for property (specifically industrial or office projects), there has been
The Czech Republic has a small open economy, making it highly little development activity. This is partly due to specific bureaucratic
dependent on external factors. During 2018, weak external regulations in the Czech Republic, but also due to a lack of
demand coupled with exchange rate appreciation had an impact on developer appetite in recent years, and as a result prime rents have
economic growth, and these factors will continue to pose a risk in increased. New space is on the way however, and in 2019 Prague
the near term. will see the delivery of a number of schemes, including Palmovka
Open Park, and Penta project by Deloitte.
The economic outlook for Brno is positive; it’s the second largest
city in the Czech Republic, and therefore has a robust labour A recent lack of development activity in the logistics market has
supply. It is also part of the South Morava region, whose potential meant there’s not been enough available space to satisfy demand.
expansion is attractive to new businesses and investors. Currently the availability rate is at an incredibly low 2%. As a result,
developers have started to show more interest in brownfield sites.
The office market reflects this and continues to be in high demand. This could help ease the transport and logistics issues in and
In 2018, several large development schemes were delivered, and around Prague.
the demand for high quality new space resulted in an increase
in prime rents. This demand for offices from both occupiers and
investors is expected to continue in 2019.
Czechia
Jakub Holec
108 AGENCY
Tel. +42 0721 733733
jakub.holec@108agency.cz
Page 12Euro Cities
Brno Prague
OFFICES OFFICES
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
174 6.30 300 5.05
172 6.20 5.00
250
170 4.95
6.10
168 200 4.90
6.00
166 4.85
5.90 150
164 4.80
5.80
162 100 4.75
5.70
160 4.70
50
158 5.60 4.65
156 5.50 0 4.60
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Brno Inner Prime yield Inner Prague Suburbs
Business Districts (P4, P5, P7) Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
LOGISTICS LOGISTICS
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
57.5 6.60 70 6.1
6.0
57.0 6.55 60
5.9
56.5 50
6.50 5.8
56.0 40 5.7
6.45
55.5 30 5.6
6.40 5.5
55.0 20
5.4
54.5 6.35 10 5.3
54.0 6.30 0 5.2
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Suburbs Prime yield Prague West Prime yield
Prague East
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
Page 13Denmark
Aalborg
5,775,224
Population
325
GDP (US $bn) Aarhus
6 Copenhagen
Average cost per pint (Euro)
Esbjerg Odense
703
Annual rainfall (mm per year)
23
Airports
159
Ports
Hamburg Szczecin
Commentary
After reaching a decade high of 2.3% in 2017, GDP growth reduced The growing interest in logistics properties has also affected the
to 1.2% in 2018. This slowdown is primarily due to temporary factors, market rent, which has increased, and the required yield, which has
including notably poor weather conditions which negatively affected compressed. Throughout 2019, investment activity is expected to
agricultural production. Over the next two years, GDP is expected to increase in order to respond to the increased demand.
grow by 1.8% in 2019 before slowing down to 1.6% in 2020 due to
the weakening of growth in Denmark’s main export markets. Consumer confidence is at a high level and Danish households’
economies are in good shape. As a result, consumer spending has
Despite a gradual tightening of the labour market, employment increased over the last couple of years, which has had a positive
growth is expected to remain robust over the next few years. effect on the retail sector. However, there has been a slight increase
The labour force, which is projected to continue expanding largely in the vacancy rates, due to consumers purchasing more online.
thanks to past pension and labour market reforms, should help The increasing vacancy rate is expected to drive down the prime rents
sustain the trend. Over the next few years, employment growth and drive up the required yield to compensate for the additional risk.
is expected to outpace the growth of the labour force, so the
unemployment rate should continue to fall gradually to 4.7% in 2020. The final quarter of 2018 was affected by increased financial
uncertainty, as evidenced in the stock and bond markets, and also
In 2018, demand for centrally located office space has increased in the Danish property market, where fewer buildings transacted.
which is reflected in growing market rents and also a large increase The decreased transaction volumes can be seen as an indication of
in transaction volumes. The increasing demand can be explained by a more risk-averse attitude from investors in a market where prices
growing employment and consequently, a low unemployment rate of in general are high. As a result, transaction volumes are expected to
3.9%. If the economic development continues, the market for office remain low throughout 2019.
space will continue to become more attractive. The heightened levels
of demand for office space has in turn driven the required yield down.
The interest in storage and logistics properties near large cities and
close to the main roads has increased throughout 2018, largely
due to an increase in e-commerce. Logistics centres are used as
middle storage stations where packages change transporter before
the packages are delivered to a pick-up place or to the recipient.
Denmark
Peter Mahony
CC Property
Tel. +45 91 11 14 45
pm@cc-p.dk
Page 14Copenhagen
OFFICES
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
300 4.05
4.00
250
3.95
200 3.90
3.85
150
3.80
100 3.75
3.70
50
3.65
0 3.60
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Copenhagen City Prime yield
Copenhagen Region
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
LOGISTICS
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
88 6.10
6.05
86
6.00
84 5.95
82 5.90
5.85
80
5.80
78 5.85
5.80
76
5.75
74
5.70
72 5.65
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Copenhagen
Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
RETAIL
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
3,500 4.00
3,000
3.50
2,500
2,000
3.00
1,500
1000
2.50
500
0 2.00
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Copenhagen City Prime yield
Copenhagen Region
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yieldsRotterdam Dortmund
Essen
London Antwerp Düsseldorf
Ghent Cologne
Brussels Bonn
France Luxembourg City
Frankfurt
Nuremberg
Paris
65,480,710 Stuttgart
Population
Munich
2,583
GDP (US $bn) Nantes
Innsbruck
6
Average cost per pint (Euro)
Lyon
867 Milan
Venic
Annual rainfall (mm per year) Turin Verona
Genoa
211 Bologna
Airports
Toulouse Montpellier Florence
Nice
268 Marseille
Ports
R
Commentary
2018 closed with the “gilets jaunes” protests which will likely have There has also been a flight to quality in 2018, with businesses
deducted at least 0.1% from GDP growth in Q4, and as a result, such as Nestlé, Lacoste, Danone, Orange, and AXA, looking for
the annual GDP growth is expected to be around 1.5%. However, modern and well located buildings, in order to attract and retain
tax cuts and lower inflation look set to fuel a marked recovery in the best talent. This increasing level of demand, combined with a
consumption this year and lead to 1.6% growth in GDP in 2019, lack of availability, will keep an upward pressure on prime rents.
with consumer demand rising by 1.4%. Occupiers might also be forced to look at the secondary market
(la Defense or the west crescent), if they’re unable to find space to
The package announced by President Macron in response to the satisfy their real estate needs.
protests will support disposable income and purchasing power,
which were already set to rise strongly this year due to cuts in Despite the reputation, the greater Paris retail market continues to
unemployment insurance contributions and lower housing taxes be challenged by online shopping, with e-commerce continuing
that came into force in Q4 last year, easing inflation (due to lower to become more popular. As a result, investor sentiment for
oil prices) and a still-strong labour market. This will bolster private traditional retail has declined, with the notable exception of high
consumption next year. street retail where exceptional deals at Champs Elysée were
concluded in 2018. The Apple building was bought for 600 million
Having enjoyed high volumes over the last 18 months, exports are Euros by BVK, and Norges bought the Nike building for 613 million
expected to slow down over the next few years, as global demand Euros, reflecting a yield of 2.5% and 2.7% respectively.
growth loses momentum, external uncertainty rises, and past euro
appreciation makes itself felt. As a result, net exports are expected Occupier sentiment in Lyon continues to be positive for office
to be neutral in 2019 and 2020. space, and in 2018 almost 33,000 sq m was let. The market saw
a number of large deals signed, notably Engie, EDF and Bobst
The Paris office market in 2018 was driven by strong occupier which all took over 10,000 sq m. A new top office rent of 300
demand in inner Paris, together with low availability, especially Euros per sq m was also set in 2018, in a recently refurbished
in the CBD. The main source of demand came from serviced historic building known as Grand Hôtel-Dieu, at Presqu’Île. This
offices, and in particular, WeWork and Spaces. There was also an demand for office space is expected to continue throughout 2019.
increased level of demand brought on by the potential implications
of Brexit, with companies such as BOA, EBA, J.P.Morgan, and Investment volumes in Lyon reached 1.2 million Euros in 2018,
HSBC looking to relocate staff outside the UK. with the majority of transactions for offices (85%).
France (Paris) France (Paris) France (Lyon)
Sylvain Piedfer Emmanuelle Gauthier Frédéric Prenot
Estate Consultant Euroflemming Expertise Sorovim
Tel. +33 6 81 30 94 45 Tel. +33 1 44 20 09 30 Tel. +33 4 78 89 26 36
sylvain.piedfer@ emmanuelle.gauthier@ fprenot@sorovim.fr
estate-consultant.com euroflemming.fr
Page 16Euro Cities
Lyon Paris
OFFICES OFFICES
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
350 3.81 900 3.30
3.80 800 3.25
300
3.79 700 3.20
250 3.15
3.78 600
3.10
200 3.77 500
3.05
150 3.76 400
3.00
3.75 300
100 2.95
3.74 200 2.90
50 3.73 100 2.85
0 3.72 0 2.80
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Part-Dieu Vaise Prime yield CBD Croissant Ouest Prime yield
Gerland Confluence La Defense 2ème Couronne
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
FRANCE LOGISTICS
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
48.0 5.3
47.5
5.2
47.0
46.5 5.1
46.0 5.0
45.5
4.9
45.0
44.5 4.8
44.0
4.7
43.5
43.0 4.6
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
France Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
RETAIL RETAIL
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
2,500 3.85 25,000 2.55
3.80 2.50
2,000 3.75 20,000 2.45
3.70
2.40
1,500 3.65 15,000
2.35
3.60
2.30
1,000 3.55 10,000
2.25
3.50
500 3.45 5,000 2.20
3.40 2.15
0 3.35 0 2.10
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
1 Primes République/Hérriot 1 bis Maréchal de Saxe, Victor Hugo Avenue Champs Elysées Rue Royale Prime yield
1 Zola, Brest, Gasparin Prime yield Rue Saint-Honoré Boulevard Saint-Germain
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
Page 17Gdynia
Gdansk
Germany Hamburg Szczecin
Bydgoszcz
Bremen
82,979,100 Berlin
Population Amsterdam
Hanover
Bielefeld
The Hague Münster Lodz
3,677 Rotterdam Dortmund
Essen Leipzig
GDP (US $bn)
Antwerp Düsseldorf Wroclaw
Dresden
Ghent Cologne
Czestoc
3 Brussels Bonn
Average cost per pint (Euro) Katowic
Frankfurt Prague Kr
700 Luxembourg City Ostrava
Annual rainfall (mm per year) Nuremberg Brno
Paris
Stuttgart
154
Airports Munich Bratislava
Vienna
Salzburg
98 Innsbruck Graz
Ports
Commentary
Industrial production in Germany appears to have had a very poor Düsseldorf is also approaching full occupancy in the office sector,
Q4. Output fell substantially in November after a weak October and, while rents are still in a sidewards trend. Retail however, remains an
as a result, the economy was almost in recession in H2. Order books anchor in the city, as it still attracts a lot of foreign tourists looking for a
and the labour market still look strong, but overall GDP growth in Q4 high class shopping experience.
was 0.0%. This means the total GDP growth in 2018 was 1.4%.
A similar level of growth is anticipated in 2019. The office market in Frankfurt continues to be in high demand, which
has resulted in low availability of suitable quality space for tenants.
The 1.9% drop in industrial output in November was broad- Serviced offices have also been active here and taken a large amount
based and something of a surprise. The strongest impact was in of space in new developments, further decreasing the availability rate.
investment goods, which were most likely affected by geopolitical Brexit will also potentially increase demand further, as more banks
uncertainty. While the brunt of the temporary production cuts in have let speculative office space in the CBD/Bankenlage.
the automotive sector has faded, the latest car association data
suggest that a full rebound will take some months. But demand Hamburg is also suffering from a lack of good quality space to
is still solid, with manufacturing orders increasing and backlogs of appease current demand. The type of occupiers looking for
work at very high levels. new space is getting more diverse, as industrial companies are
locating their head offices in Hamburg. There is a however a large
Although Berlin is still lacking behind the other big cities in Germany, development pipeline which will deliver new space to the market
from an economic perspective, it is catching up. More and more over the next few years which in turn will help the dynamics.
companies, especially from abroad, are looking at taking space in
Berlin. Whilst the city is largely dominated by the administrative and Munich is still the city with the highest GDP per capita, and its
service economy, there is an increasing level of demand coming from prospects remain strong. The only noted downward trend is the low
the media and technology sector. vacancy for housing, which could lead to a reduction of potential
workers, as high living costs make it more and more unattractive.
The office market in Berlin has been restricted by a lack of availability, Logistics however are still the most sought-after asset class in
particularly in the inner city. There are more developments on the Germany, and in particular in Frankfurt, given its role as a transport
outskirts, for example in Adlershof, but the majority of this space is hub in central Germany.
being taken by serviced offices. More developments in the centre will
be delivered over the next two years, however the demand for space
is so high that the majority of these have already been pre-let. As a
result, prime rents are increasing.
Germany
Dr. Stefan Behrendt
Dr. Lübke & Kelber GmbH
Tel. +49 699 9991315
stefan.behrendt@drlk.de
Page 18Euro Cities
Berlin Düsseldorf
OFFICES OFFICES
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
390 3.12 325 3.80
3.10 324 3.75
380
3.08 323 3.70
322 3.65
370 3.06
321 3.60
3.04
360 320 3.55
3.02
319 3.50
350 3.00
318 3.45
2.98 3.40
317
340
2.96 316 3.35
330 2.94 315 3.30
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Berlin Prime yield Düsseldorf Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
LOGISTICS LOGISTICS
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
75 5.00 80 5.0
74 4.90 70 4.9
4.80 4.8
73 60
4.70 4.7
72 50
4.60 4.6
71 40
4.50 4.5
70 30
4.40 4.4
69 20
4.30 4.3
68 4.20 10 4.2
67 4.10 0 4.1
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Berlin Prime yield Düsseldorf Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
RETAIL RETAIL
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
4,500 3.55 4,000 4.0
4,000 3.50 3,500 3.5
3,500 3.45
3,000 3.0
3.40
3,000
3.35 2,500 2.5
2,500
3.30 2,000 2.0
2,000
3.25 1.5
1,500
1,500
3.20
1,000 1.0
1,000 3.15
500 3.10 500 0.5
0 3.05 0 0
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Berlin Prime yield Düsseldorf Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
Page 19Frankfurt Hamburg
OFFICES OFFICES
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
500 3.8 319 3.5
490 318
3.7
317 3.4
480
3.6 316
470 315 3.3
3.5
460 314
3.4 3.2
450 313
3.3 312
440
311 3.1
430 3.2
310
420 3.1 309 3.0
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Frankfurt Westend Prime yield Hamburg Prime yield
Bankelage Stadtmitte
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
LOGISTICS LOGISTICS
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
80 5.2 80 4.9
70 70 4.8
5.0
4.7
60 60
4.8
4.6
50 50
4.6 4.5
40 40
4.4 4.4
30 30
4.3
4.2
20 20
4.2
10 4.0 10 4.1
0 3.8 0 4.0
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Frankfurt Prime yield Hamburg Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
RETAIL RETAIL
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
4,000 3.46 4,000 3.36
3,500 3.44 3,500 3.34
3.42 3.32
3,000 3,000
3.40 3.30
2,500 2,500
3.38 3.28
2,000 2,000
3.36 3.26
1,500 1,500
3.34 3.24
1,000 3.32 1,000 3.22
500 3.30 500 3.20
0 3.28 0 3.18
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Frankfurt Prime yield Hamburg Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
Page 20Munich
OFFICES
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
460 3.4
455
450 3.3
445
440 3.2
435
430 3.1
425
420 3.0
415
410 2.9
Q3 2016 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Munich Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
LOGISTICS
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
90 4.9
80 4.8
70 4.7
60 4.5
50 4.5
40 4.4
30 4.3
20 4.2
10 4.1
0 4.0
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Munich Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
RETAIL
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
5,000 3.10
4,500
3.05
4,000
3,500 3.00
3,000 2.95
2,500
2.90
2,000
1,500 2.85
1,000
2.80
500
0 2.75
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Munich Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yieldsIreland Glasgow
Edinburgh
4,803,748 Belfast
Population
Sligo
334
GDP (US $bn) Manchester
Dublin
5.50 Galway Liverpool
Average cost per pint (Euro) Limerick
Birmingham
Amsterdam
1,118 The Hague
Annual rainfall (mm per year) Waterford Rotterdam
Cork London
10 Antwerp
Airports Ghent
Brussels
49
Ports
Commentary
Overall, 2018 was a good year for the domestic economy as The industrial market in Dublin performed steadily in 2018 with good
consumer spending grew by 4.6% in the first nine months but levels of transaction activity. Take-up for last year reached 269,000 sq m
weakened on the latter part of the year due to growing economic which was 14% higher than 2017. The greatest level of activity was
uncertainty. Employment growth is yet to show any sign of slowing focused in South West Dublin region. Occupier demand for Grade A
and the unemployment rate stood at 5.3% in December 2018, an stock is strong, however there is a lack of availability currently. As a
11 year low. Whilst positive employment growth is expected to result, prime rents reached 9.50 per sq ft for new units.
continue in 2019, GDP growth will be weaker than in recent years
as the economy is now close to capacity. In 2018, prime retail rents in Ireland remained stable. In spite of
Brexit uncertainties, consumer confidence remains high, and in
The Dublin office market had another record year of take-up in particular the food and beverage and the beauty sector accounted
2018, with leasing volumes reaching 369,522 sq m, a 6% increase for over 50% of deals.
on 2017. Occupiers are targeting quality in order to attract and
retain the best talent, and as a result there has been high levels of UK retailers expanded their business presence in Dublin throughout
pre-letting over the last 12 months. The media & technology sector the year, and notably, The Ivy opened its first restaurant in Dublin on
in particular has been active, with Google, LinkedIn, and Hubspot all the ground floor of a new office scheme in the Dublin 2 district.
taking significant amounts of space. In addition, Facebook signed
the largest ever letting for the Dublin/Irish market, when it signed a 3.6 billion Euros of Irish property traded in 2018 across 256
81,000 sq m pre-let at the AIB Bankcentre Scheme in the Dublin transactions. The largest transactions included the sale of Heuston
4 district. WeWork has also signed for approximately 32,000 sq m South Quarter for 175m Euros, Dublin Landings to Triuva for
across five buildings with more deals expected in 2019. 164m Euros and The Grange, Stillorgan to Kennedy Wilson for
161m Euros.
Pre-letting activity is likely to continue in the early part of 2019,
especially as Amazon and other tech companies are close to Dublin remains the key location for investors, and in particular from
agreeing terms on additional space. Brexit could have an impact overseas. Demand for PRS is likely to remain strong in 2019 and
on the office market depending on the outcome of the current continued interest in the office and logistics markets is expected.
negotiations with either full or shadow relocations already either Brexit however could have negative consequences as people
threatened or mooted by affected companies in the UK. Signs of assess the implications of any political decisions.
a two tier market are emerging with international and domestic
occupiers displaying differing abilities to pay prime rental levels.
Ireland Ireland Ireland
Robert Murphy James Mulhall Rebecca Breen
Murphy Mulhall Murphy Mulhall Murphy Mulhall
Tel. +353 1 634 0300 Tel. +353 1 634 0300 Tel. +353 1634 0300
rm@murphymulhall.ie jm@murphymulhall.ie rb@murphymulhall.ie
Page 22Dublin
OFFICES
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
800 4.30
700 4.25
4.20
600
4.15
500
4.10
400
4.05
300
4.00
200 3.95
100 3.90
0 3.85
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Dublin CBD South Suburbs
Dublin City Edge Prime Yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
LOGISTICS
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
100 6.2
99
6.0
98
5.8
97
96 5.6
95 5.4
94
5.2
93
5.0
92
91 4.8
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Dublin Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yields
RETAIL
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
8,000 4.0
7,000 3.5
6,000 3.0
5,000 2.5
4,000 2.0
3,000 1.5
2,000 1.0
1,000 0.5
0 0
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Grafton Street, Dublin Carrickmines Retail Park, Dublin
Blanchardstown Shopping Centre, Dublin Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yieldsNantes Innsbruck Graz
Lyon
Italy Turin
Milan
Verona
Venice
Genoa
Bologna
59,216,525 Toulouse Montpellier Nice Florence
Population Marseille
1,935
GDP (US $bn)
Rome
5 Barcelona Bari
Average cost per pint (Euro) Naples
Madrid
832
Annual rainfall (mm per year)
Valencia
Cagliari
78
Airports Palermo
Catania
nada 311
Ports
Malaga
Commentary
Despite overall GDP growth of 0.9% in 2018, the Italian economy was The industrial sector in Rome continued to grow, with leasing
actually in recession by the end of the year. However, the moderation volumes increasing in 2018 by 7.6%. This was largely driven by an
in domestic financial market stress and the stabilisation in some increasing level of demand for logistics buildings.
indicators, such as employment and the composite PMI, should
set the stage for a marginal increase in GDP in 2019. But the risks Investment volumes in 2017 exceeded 11 billion Euros, and 2018
remain clearly on the downside and the recession could drag on into volumes are expected to be at a similar level, with investor attention
H1 2019, particularly if eurozone growth continues to disappoint. focused on the retail and office sector. Transaction volumes for
For 2019 as a whole, GDP growth is expected to be only 0.3%. logistics centres actually declined in 2018, however this was due to
a lack of availability rather than demand.
The Government approved the 2019 budget, sending domestic bond
yields sharply lower. The deficit for 2019 is now projected at 2% of Rental growth is expected to grow positively in 2019, particularly
GDP (previously 2.4%), thereby preventing the European Commission for logistics centres, the demand for which is being driven by
from launching an Excessive Deficit Procedure. However, the substantial growth in the online retail market. This will continue to
modifications to the plan will amount to little, with most of the original draw attraction from investors and overall transaction volumes are
expenditure measures simply postponed until 2020 and offset expected to grow in 2019.
by a large VAT increase in 2020-21, which if implemented could
substantially undermine already mediocre GDP growth. Investor sentiment for alternative asset classes such as the hotel
market or new forms of housing (student housing, senior housing,
Overall employment levels remained flat in the second half of co-housing, etc.) is also increasing, and as a result, overall
2018, with the unemployment rate hovering just above 10.5%. transaction volumes are expected to rise.
However, 2019 inflation is expected to average around 0.9%,
which should help with growth in real incomes.
In the property market, occupier sentiment remains strong for the
right property, with high quality products in demand in both Rome
and Milan. This has been reflected in the continued positive net
absorption recorded in the market. The office market in Rome
has attracted particular attention from corporate administration
occupiers. There is also an increasing level of demand coming
from serviced offices, which looks set to continue in 2019.
Italy
Francesca Fantuzzi
Gabetti
Tel. +39 02 775 5391
ffantuzzi@gabetti.it
Page 24Euro Cities
Milan Rome
OFFICES OFFICES
Prime rents and yields Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%) Prime rent (¤ per sq m per annum) Prime yield (%)
600 5.0 450 5.5
4.5 400
500 5.4
4.0 350
3.5 5.3
400 300
3.0
250 5.2
300 2.5
200 5.1
2.0
200 150
1.5 5.0
1.0 100
100 4.9
0.5 50
0 0 0 4.8
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Milan CBD Centre Periphery Prime yield Rome CBD Rome Semicentre Periphery
PN BD Semicentre Hinterland Rome Centre EUR Prime yield
2019 Outlook 2019 Outlook
Occupier demand Investor activity Occupier demand Investor activity
Development supply Prime rents Development supply Prime rents
Availability Prime yields Availability Prime yields
Page 25Hanover
Amsterdam
Luxembourg The Hague Münster
Bielefeld
Rotterdam Dortmund
Essen
596,992 Düsseldorf
Population Antwerp
Ghent Cologne
62 Brussels Bonn
GDP (US $bn)
3 Frankfurt
Average cost per pint (Euro)
Luxembourg City
934
Annual rainfall (mm per year) Nuremberg
Paris
1 Stuttgart
Airports
Munich
0
Ports
Commentary
The Luxembourg economy is regaining momentum following weaker Leasing activity continued to be strong in 2018, supported by the
GDP growth of 1.5% in 2017, having grown by 3.1% in 2018, driven strength of the underlying economy. Whilst there has already been
mainly by private consumption and investment. some relocations from the UK, the full impact of Brexit has yet to be
realised, and could result in further demand over the next few years.
Overall employment growth increased by 3.8% in 2018, compared
to 3.4% in 2017, meaning the unemployment rate continues to Due to the lack of available space, especially in the CBD and business
decline. This improvement in the labour market should benefit private districts, occupiers have been forced to locate to the peripheral markets,
consumption, while disposable income is set to receive a boost from which as a result have seen an increase in leasing activity. The delivery of
taxation reforms and a new wage indexation applied from August a number of buildings in Cloche d’Or, resulted in an increase in take-up
2018. Private investment should also receive support from continuing towards the end of the year, including notable deals for Deloitte, Alter
corporate tax reductions, favourable financing conditions and high Domus and several Government agencies.
levels of capacity utilisation.
Investor sentiment also remained strong throughout 2018, as
The international financial sector, traditionally Luxembourg’s main Luxembourg continues to attract new institutional investors.
growth engine, was still profitable, despite subdued growth and recent Over 2 billion Euros were transacted throughout the year, with half
developments in global financial markets. Bank lending dropped in the of that coming in the final quarter of the year.
first quarter of 2018 and net investment inflows into funds slowed in
the second quarter. While growth is set to continue, the moderation in However, due to the lack of office development recently, office
the external environment has weakened growth prospects for financial investment opportunities remain few, which has resulted in further
services, as well as for the economy as a whole. pressure on prime yields and the migration of investors to
peripheral markets.
With the momentum of foreign trade expected to ease over the
next few years, economic growth is set to be supported mainly by The transactions which completed in 2018 mostly involved larger
domestic demand. In time, as employment gains become smaller and buildings, with fewer opportunities for value-add and opportunistic
the impact of tax reforms fade away, domestic demand will also lose buyers. Core investors continue to adapt to lower yields.
some of its lustre, and could limit GDP growth going forward.
In the property market, a combination of strong, continuous demand
from occupiers for new space, and a lack of construction in the
development pipeline, resulted in an upward pressure in prime rents
and lower vacancy rates.
Luxembourg Luxembourg
Michael Chidiac Emmanuel Laurent
Realcorp Realcorp
Tel. +352 26 27 29 Tel. +352 26 27 29
mchidiac@realcorp.lu emmanuel.laurent@realcorp.lu
Page 26Luxembourg City
OFFICES
Prime rents and yields
Prime rent (¤ per sq m per annum) Prime yield (%)
700 4.60
4.50
600
4.40
500
4.30
400 4.20
300 4.10
4.00
200
3.90
100 3.80
0 3.70
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Luxembourg City Business District Kirchberg
Station Prime yield
2019 Outlook
Occupier demand Investor activity
Development supply Prime rents
Availability Prime yieldsYou can also read
