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places spaces
No. 2 | 2017
The Real Estate Magazine of Union Investment
Logistics properties
Investment opportunities
along the supply chain
Blockchain
Technologies with tremendous
potential for change
Micro Living
Temporary living is becoming
an asset class
France's growing
real estate markets
The economic figures make Paris and many regional cities
appealing for international investors
places spaces
The Real Estate Magazine of Union Investment
No. 1 | 2017
No. 2 | 2016
places spaces
Secondary Cities
Where investors see
opportunities in the US
CONTENTS
office market
e of Union Investment Digitalisation
The Real Estate Magazin How PropTechs and the real
estate industry are getting
together
Risk management
Real estate funds
respond to the glut Portfolio strategy
What property professionals
of liquidity
expect from the extended
COVER STORY
market cycle
Office worlds thinkers
New spaces for creative
Mexico
for investors
An attractive place
4 Logistics The growing online retail sector poses new
challenges for supply chains. Borders between retail and
logistics are blurring Hotels –
the new asset stars
11 Interview Alexander Nehm, Managing Director of Logivest They are popular all over the world
are booming. The hotel concepts that
since tourism and properties
hold the greatest promise
Concept, on the future of logistics real estate
Dynamic Structures g how spaces are
used
Digitalisation is changin opportunity
tive retail as a good
Investors view innova
PORTFOLIO
12 Indirect property investment International Common Dear reaaders,
real estate vehicles and their prevalence
Welcome to places & spaces!
MARKETS
14 France New boom for Paris and some regional cities: Our real estate magazine, places spaces No. 2 | 2017
international property investors have rediscovered their available in German and
The Real Estate Magazine of Union Investment
Logistics properties
Investment opportunities
love for La Grande Nation along the supply chain
English, offers high quality
Blockchain
Technologies with tremendous
potential for change
Micro Living
17 Column Myriam Chauvot, finance and economics journalist, Temporary living is becoming
articles and information
an asset class
on the "Macron Effect" on France's property market
26 Hotel property The German market volume for hotels that are on the national and
relevant for investment purposes tops the 50 billion mark international investment
and letting markets. France's growing
CONCEPTS real estate markets
The economic figures make Paris and
many regional cities
appealing for international investors
20 Infographic PropTech Innovation Award with nine finalists in
the first international competition for real estate start-ups The subjects covered by the digital
28 Blockchain Technology with great potential to change the magazine are constantly being updated:
international real estate market
www.places-and-spaces.com
32 Micro Living Growing demand for temporary housing makes
the market segment appealing to property investors
36 Car Parks Managing multi-storey car parks requires new
concepts for greater efficiency and value retention As usual, you will find ordering and download
options for places & spaces as well as up-to-date
REAL PEOPLE information about Union Investment on our
22 Portrait Marc Lauterfeld is Union Investment's General homepage:
Counsel Real Estate
www.union-investment.de/realestate
WIDE ANGLE
42 Room for manoeuvre The art of using even the tiniest spaces
I hope you have fun with places & spaces and
3 TO THE POINT look forward to hearing your views.
27 NEWS
43 PUBLISHING INFORMATION & CONTACT
43 NEW IN THE UNION INVESTMENT PORTFOLIO
Cover photo Kind regards,
Paris, France: A view of Alexander Calder's sculpture, “Araignée Fabian Hellbusch
Rouge,” from the Place de la Défense. The La Défense high-rise
Head of Marketing and Communication
quarter is Europe's largest business district with 3.3 million
square metres of office space. fabian.hellbusch@union-investment.de
places & spaces 2 | 2017 places mehr 12 | 2017
RAUM& &spaces
CONTENTS TO THE POINT
Pulling together
Jörn Stobbe on the digitisation mega-trend in the real estate industry
B ig data fever even found its way into this year's Tour
de France. Sensors on bicycles and riders delivered
hundreds of millions of pieces of data – about the
athletes' physical condition, speed, road conditions and weath-
er. The message was clear: when it comes to digitisation the Tour
offers the opportunity to connect a building with its tenants and
efficiently manage desk-sharing models or guide them to
available parking spaces in real time. In short, in the not-too-
distant future, there will be buildings and technologies that are
aligned with their users' needs while at the same time helping
de France is keeping up with the peloton. And what is true for them act sustainably.
the world's biggest sporting event is true for nearly every indus- But there are still a few hurdles left to overcome before this
try and the vast majority of businesses. Wanting to actively becomes reality. One major challenge lies in convincing users
Paris in focus The last mile shape the digital future instead of being run over by it is a key
component of many companies' business strategies, at least
that capturing consumption data in our buildings serves the sole
France's property market is booming again Retailers, cities and real estate professionals
and it’s not just limited to the capital. are facing growing challenges due to e-com- on paper.
merce – but there are opportunities too. The property industry is no different. The digitisation me-
Page 14 ga-trend reached real estate some time ago and there are now
Page 4 a great number of digital business ideas and smart tools for eval-
uating huge data volumes or accelerating time-consuming anal-
ysis and management tasks. One area in the property industry
in particular is benefiting from the possibilities of a world turned
digital: the implementation of sustainability goals. In this area,
the benefits of digital technology cannot be overestimated, as
our experience in recent years has shown. Union Investment has
been using an online tool to sustainably manage its property
portfolio since 2009. Not only does the system serve as the Jörn Stobbe, Chief Operating Officer and Member of the
Photos: imago/Westend61, Getty Images (2), Ulrike Leyens, Urban Zintel/Union Investment
basic tool for collecting and analysing all property data, it's Management Board at Union Investment.
also used to generate reports, studies and ratings. Furthermore,
it provides the basis for the sustainable development of individ- purpose of managing them more sustainably – not only to the
ual properties. benefit of the environment and society, but also to the users
That's how we know: a tool is only as good as the data you themselves. Unfortunately, there are still vast gaps in consump-
feed into it. And there are still large gaps when it comes to tion data for electricity, heat and water as well as the amounts
Verging on a breakthrough Cover photo: Lionel Montico/Hemis/laif
sustainability. But we have high hopes for smart buildings and of waste generated.
Blockchain has arrived in the real estate world the Building Information Modelling (BIM) trend, which we be- If the real estate industry and users pull together, digitisation
and it’s already being used. lieve will provide the greatest momentum for achieving sustain- can offer us excellent tools for achieving climate change goals.
ability goals. With their help, capturing consumption data Let's build smart buildings and districts and work together with
Page 28
Globale expertise automatically as well as measuring and improving indoor air our technology partners to digitise real estate! Dumb buildings
Marc Lauterfeld is Union Investment's quality can become a reality. Using specialised sensors also are a thing of the past. •
General Counsel Real Estate.
Page 22
2 places & spaces 2 | 2017 places & spaces 2 | 2017 3
Urban
COVER STORY
Logistics facilities are on the verge of a new boom. E-commerce is growing,
bringing more package deliveries and traffic jams with it. Whether it's retailers,
Storage
city officials or real estate professionals, everyone is looking for solutions to
ensure that our cities are well supplied. By Rahel Wilhardt
In the past, the customer came to the goods. These days,
the goods come to the customer. Distribution centres are
needed close to cities to ensure timely delivery. Chapelle
Photo: Sogaris
International in the north of Paris is one such logistics
hub. The project by logistics provider Sogaris offers excel-
lent efficiency and sophisticated design coupled with en-
4 places & spaces 2 | 2017 vironmental and urban sustainability. places & spaces 2 | 2017 5 ▶
COVER STORY
A lfons Nißl runs a shoe store near Munich. However,
he now sells more on Amazon and eBay than in his
physical shop. In just two years, his online sales
have risen from 5 to almost 60 percent. The retailer spends an
equivalent amount of his time preparing and sending packages.
Does Alfons Nißl still have a shop, or is it now a warehouse with
sales outlet?
Nißl's case is not isolated. Processing online purchases is taking
up more and more space. “Retailers are developing a new sense
of identity through their multichannel strategies. They understand
Photos: Imago, Media Markt, Claudius Pflug/Zalando
that they are closer to the customer – and take advantage of their
brick-and-mortar locations,” says Alexander Nehm, the Managing
Director of Logivest Concept (see interview on page 11). There
are a growing number of pickup and delivery services like Click & Coll-
ect or Ship from Store. At John Lewis, the UK-based retail chain, half
of all online purchases are collected in-store; Decathlon and IKEA have
developed Click & Collect-compatible store formats. More and more
brick-and-mortar retailers – including German retailers MediaMarkt-
Saturn and Galeria Kaufhof and British supermarkets Sainsbury’s and
Tesco – now deliver purchases to the customer's doorstep. Integrated commerce: Online retailer Zalando is cooperating Retail chain MediaMarkt is already testing mobile robots that deliver products to the customer's doorstep (left); UK retailer
with brick-and-mortar shops, for example Adidas in Berlin. Sainsbury’s offers the same service – although it currently still uses vans (right).
Amorphous shop floors
The white paper from the EHI Retail Institute “Expansion Trends –
Spring 2017” confirms that warehouse and pick-up logistics are like Lago and Alexa, for example, we created additional warehouse Operations - Property Services at Goodman. London is leading the way, “Supermarkets, specialist shops, department stores and malls want to
trending upwards for retailers. Among the 250 major chains surveyed, space by converting leisure or office space. That also worked well eco- having lost 25 percent of its commercial space to housing – although be supplied with huge quantities of goods. Their delivery experience
such as German retailers Rewe and Deichmann, a growing number nomically because the rent for desirable warehouse space is signifi- the UK has the highest online sales in all of Europe at $174 billion. depends on their readiness to convert their space's use. Even dark of-
are seeking easy-to-reconfigure spaces, preferably with an expandab- cantly higher than for office space,” says Ralf Schaffuss, an asset According to a 2015 report from the Ecommerce Foundation, France fices work if they have adequate accessibility and a loading ramp.”
le warehouse, convenient entrance and exit and drive-thru. However, manager at Union Investment Real Estate GmbH. was second with $72 billion and Germany third with $66 billion. With Consequently, the logistics industry could become an alternative tenant
that's not yet the case everywhere. In asset management at Union In- annual growth rates between 11 and 14 percent, there are no signs for vacant retail properties in B and C locations. Because the last mile
vestment Real Estate GmbH, these kinds of requests are the exception Space hogs with not enough space of slowing. – transportation to the customer's doorstep – consumes 30 percent
among tenants of the core shopping centres. “In the successful centres Generally speaking, logistics wants to move into urban centres. of logistics costs according to Paetzmann, rents of between €10 and
Why? Because in the past, the customer came to the goods. These Cooperation is needed €15 per square metre per month are conceivable for cost-saving loca-
days, the goods come to the customer. With the supply chain shifting Zalando has a vision for alleviating the shortage. The online fashion tions, even more in London and Paris. And because a lack of space
The need for new build logistics space in three scenarios
away from goods to the consumer, from push to pull, demand for well- czar wants to network Europe's infrastructure of stores one by one makes people creative, ideas for using car parks, offices or malls at
Growth of e-commerce revenues in billions of euros and in the need
for new build logistics space in millions of square metres in Germany networked depots is rising. In the push system, there were three with large warehouses. Since it doesn't have its own stores, it's testing night for distribution centres have emerged. If this approach catches
nodes: producer, distributor and retailer. In the pull system, the different ways of cooperating with local shops under the banner of on, new opportunities for cash flow optimisation will open up in asset
E-commerce revenues Space needed “Likely case“
Space needed “Best case” Space needed “Worst case”
supply chain is more granular because direct delivery to millions of in- integrated commerce. The goal is short supply routes and no product management.
€80 billion 1.6 million m2 dividual customers is more laborious. At the same time, the pull per- shortages. Local boutiques pack and send Zalando packages across
spective makes the flow of goods more efficient because targeted de- Germany, or Adidas's Berlin warehouse and flag- Delivery lorry shuffle
mand triggers shipping instead of estimated forecasts. In addition to ship store helps the online retailer with sold-out As creative as retailer strategies for optimising the
75 %
60 1.2
massive fulfilment centres in the greenfield there is demand for pa- models. If brick-and-mortar retailers embrace the infrastructure may be, they do not alleviate the
ckage handling hubs near cities and many sorting and delivery centres cooperative logistics idea, customers will receive pressing problem of excessive delivery traffic in
40 0.8
in the city that deliver to residences, pick-up stations and package their ordered products very quickly because the metropolitan areas. This is growing continuously,
collection points. closest store processes the order. of Europeans currently bringing with it the risk of gridlock. The German
20 0.4
That would be fine – if existing cities weren't lacking the space Change of use is another way to integrate dis- Package & Express Logistics Association estimates
live in cities;
to integrate these space hogs. “Where urban rent and land prices tribution centres into existing cities. As Raimund that 3.1 billion (package) shipments were sent
0 0 in 30 years, that is
are almost unaffordable for the logistics sector, the question of how Paetzmann, Vice President Corporate Real Estate in 2016 in Germany alone, 150,000 more than
’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15* ’16* ’17* ’18* ’19* ’20* expected to climb to
to integrate stores to optimise the supply chain is one of the hottest (including network planning) at Zalando, explains, in 2015. This is expected to grow to 3.78 billion
82 %
* Estimate Source: Fraunhofer Supply Chain Services:
“Logistics properties – market and locations 2015,” September 2015 topics in urban logistics,” says Marie Maggiordomo, Director of the challenge of city logistics isn't really new. by 2020. ▶
6 places spaces1 |22016
RAUM & mehr | 2017 places & spaces 2 | 2017 7
COVER STORY
“For 30 years, cities focused on
pushing logistics out of their centres.
Now they're all considering
ways to bring it back.”
Walther Ploos Van Amstel, Professor of city logistics at
Amsterdam University of Applied Sciences
“For 30 years, cities focused on pushing logistics out of their cen- service providers have already responded: DHL is building up its own
tres. Now city officials in European metropolitan areas are considering fleet of electric vehicles, Schenker is testing electric lorries for long
ways to bring it back,” says Walther Ploos Van Amstel, professor of city distances and UPS is experimenting with e-bikes and micro-depots
logistics in Amsterdam. For him, although delivery traffic sparked the in Hamburg.
debate, the fundamental problem is urbanisation.
Almost 75 percent of Europeans currently live in cities; in 30 years, A new asset class is born
that's expected to climb to 82 percent. To supply thousands upon With traffic abatement in mind, the ideal property would be an inde-
thousands living in a small area, urban logistics needs to improve its pendent service hub for handling packages, meaning a non-CEP-affi-
overall efficiency. This applies equally to consumer goods, waste dis- liated centre that sorts the collected packages for the catchment area
posal and B2B deliveries. In other words, metropolisation is redefining by postcode and consolidates them on neutral delivery vehicles every
quality of life and the requirements for city and land-use planning. morning. However, the CEP providers protest because none of them
Where once individual mobility and residential comfort dominated pl- wants to lose contact with the customer. The model could only be im-
anning, smooth supply logistics is becoming increasingly important. It plemented with strict local government regulations and a business
helps cities to secure their competitiveness. model that finances operations.
City logistics is already on the agenda at all policy levels – from “City logistics is the hot topic. Everyone is thinking about how to
local government to the European Parliament. These efforts are sustainably integrate logistics in cities and reduce emissions, noise and
Photos: Mike Henning, Getty Images
primarily aimed at stemming traffic, noise and air pollution. Low pollution. Up to now no one has systematically thought about how Deutsche Post has had a van with an electric motor developed for inner-city package delivery (left). Package delivery via drones is still
emission zones are the most common countermeasures. They ban the properties themselves should be set up.” Goodman's Strategy Ma- a thing of the future. The photo on the right shows a DHL parcel copter in test flight.
heavy-polluting diesel vehicles from city centres in favour of more nager Marie Maggiordomo has made this point at countless European
environmentally friendly alternatives. London, Amsterdam and logistics conferences. The global warehouse specialist has therefore
Brussels are pioneers, with Athens, Madrid, Paris, Berlin and Munich taken the initiative and announced a series of future labs with selec- stakeholders. We are bringing all the representatives together at one property is a product warehouse, handling hub and collection point,
announcing measures as well. Courier, express and parcel (CEP) ted companies along the value chain. “City logistics involves a lot of table in order to foster acceptance and develop convincing solutions while the other is occupied by offices, a restaurant, gym and vocatio-
– from government agencies and chambers of commerce to shipping nal school. However, this can be problematic at times. “Who would
companies, logistics providers, property investors and managers,” says want to live next to a warehouse among endless lines of diesel lorries?
The setup and location of e-commerce spaces vary widely
Classification of logistics property types in Europe by building and location characteristics
Maggiordomo. On the other hand, who is willing to do without the convenience of
“These days urban logistics properties are sought more often than online shopping?” asks Sogaris CEO Jonathan Sebbane, describing the
E-commerce space Important building characteristics Important location characteristics
they are found because there are scarcely any suitable properties in tension surrounding city logistics.
inner cities. What we do have are hubs and micro-depots for handling His building type offers suitable solutions: the design is
E-fulfilment mega-centre · Very large (50,000 square metres to over 100,000 square metres) · Close to parcel centres the last mile. These spaces are too small for freestanding facilities,” appropriate and at the same time multimodal, so there are at least
· High ceiling (15 metres) to allow for intermediate storeys · Close to large labour pool
· Often in cross-dock configuration · Traditional “centre of gravity” is not explains Alexandra Tornow, EMEA Industrial & Logistics market two transportation alternatives. Furthermore, it prevents air and
· Large number of parking spaces for full-time and seasonal employees necessary researcher at JLL. “Assets will also be built in cities in the foreseeable noise pollution.
Parcel centre/sorting centre · High length-to-width ratio · Focal point for supplying local parcel service future,” she predicts. This includes handling hubs called loading ter- For example, deliveries in the massive catchment area in the north
· Low building density (intensity of land development) centres in hub-and-spoke networks
· Cross-dock configuration with generous dimensions for lorry loading zones minals that are located at the city limits to transfer freight to environ- of Paris are handled with e-bikes, biogas lorries and a shuttle transport
· 360° traffic around the building mentally friendly vehicles in order to comply with diesel bans. It also train for which a noise-dampening 400-metre terminal was built. Thanks
· Highly automated internal operations including sorting system
includes multi-storey warehouses due to small plots of land and high to the system developed in-house, costs per kilometre for train freight
Parcel service centre and · High length-to-width ratio · Outskirts of major cities and metropolitan
urban logistics depot · Low building density (intensity of land development) areas for home delivery or delivery to pick-up prices. For instance, Segro is building a two-storey warehouse in Mu- are competitive with those for lorries. If a diesel ban is introduced in
· Cross-dock configuration with generous dimensions for delivery van loading points nich, Vailog has 64,000 square metres over three storeys in Gennevil- 2020, the location is prepared. The decision on an additional hybrid
zones
· 360° traffic around the building liers, France, and Sogaris has combined the warehouse portion with property in Bercy Charenton will be taken in 2017 – a comparable
Returns centre · Normally customised to type of operation · Close to e-fulfilment centres to other uses in its three-storey Chapelle International property in the project in the south of the city which Sogaris bid for with an even more
accelerate the reintegration of returned north of Paris. integrative solution.
products
The project in Beaugrenelle in central Paris is also forward-looking.
Dot.com warehouse for e-fulfilment · Specifications depend on type of operation, e.g. level of automation · Outskirts of major cities and metropolitan
of food products · Custom loading equipment for delivery vans areas where online food product order
Clever solutions with mixed-use Here the urban logistics pioneer integrated 3,000 square metres of
· Large yard area for parking trailers and delivery vans as well as parking spaces volumes are highest Even if the French logistics provider wants to keep its Chapelle Inter- warehouse space in the underground car park of a residential building.
for large number of employees
national property in its own portfolio, it shows what investor-worthy A practical combination that is not feasible in every country. German
Source: JLL Research Germany, 2017 projects could look like: half of the 45,000-square-metre mixed-use zoning laws do not allow that currently, but may in the future. ▶
8 places & spaces 2 | 2017 places & spaces 2 | 2017 9
COVER STORY “In ten years logistics will be a
normal part of mixed-use projects
like stores, housing and offices
are today.”
Raimund Paetzmann, Vice President Corporate Real
New image for an entire industry
Estate (including network planning) at Zalando
The future of logistics property is enveloped in myths, fashions and trends. A conversation with
There is discussion of an amendment to the law that will designate offerings, investing in urban area logistics is certainly possible. “Urban Alexander Nehm, Managing Director of Logivest Concept.
urban areas as a zone with a permissible noise level similar to centres have the greatest demand for logistics. The trend is attracting
commercial areas. For Vice President Corporate Real Estate Paetzmann, a growing number of investors who were previously interested in retail Mr. Nehm, what does the future of logistics with them. Neither 3D printers nor standards from an overall logistics
it's a step in the right direction. “The goal needs to be integrating mo- properties. property look like? Industry 4.0 will fundamentally change perspective. Network service providers
dern logistics through clever mixed-use solutions. In ten years it will be A retailer used to need 200 stores to cover the UK market, but now Surprisingly similar to today. The bulk buildings and locations in the near future. all follow their own idea of efficiency.
a normal part of mixed-use projects like stores, housing and offices are 70 locations, a website and warehouse capacity is enough,” notes Jack business will stay the same. Only the By contrast, e-commerce, e-mobility, What will change logistics locations is
today,” he predicts. Cox, Head of EMEA Industrial and Logistics Capital Markets at CBRE, urban centres are highly dynamic, but the Uberisation of logistics resources automation: logistics is emancipating
looking at logistics investment volumes that have been growing stea- city logistics is a relatively small industry and smart properties are all here to itself from personnel. In the future firms
Investing along the supply chain dily since 2009. segment. That's why we advise people in stay. The latter will reduce additional will be able to settle in easily accessible
It remains to be seen whether amending zoning laws will make it ea- “Investors in urban logistics have now understood that hubs in the charge of logistics and real estate not to costs and increase willingness for locations with a small catchment area.
sier for logistics firms to secure locations in Germany. “In order to crea- greenfield and last-mile depots in the city and periphery belong in the panic. No one should expect revolutionary long-term leases. In addition, technology is enabling
te space in crowded cities, the most price-conscious of all asset classes same value chain,” continues Cox, encouraging investors to take ad- upheaval from digitisation and globalisati- logistics facilities to be built upwards
will need to correct its willingness to pay upwards. Competition with vantage of opportunities along the supply chain. “The returns were on over the next ten years – at least that's To what extent is city logistics changing instead of outwards – we will see
social housing construction will heat up in the periphery, and with comparable ten years ago. These days the capital value of urban logi- what we found in our study “The future of logistics locations? more of this over the next five to
B and C commercial locations in the city centre,” says Catella resear- stics property is significantly higher per square metre. Despite this, the logistics property.” Instead of speculating, Once again, logistics users who consider ten years.
cher Thomas Beyerle, describing the challenge. Although there are few returns are appealing because their prospects for rental growth are we looked carefully at what strategies city warehouses relevant are in the
investment opportunities in city logistics due to a lack of suitable greater,” he argues. • are on managers’ minds and what plans minority. Online giants, package delivery Looking back at 25 years of city logistics
are solid and specific. That ultimately providers, urban retailers and grocery experiments, you’ve said, “The largest
decides what will happen in the next five stores need these facilities. They place common denominator is failure.” So how
to ten years. consolidation warehouses in the suburbs can logistics work in cities?
or the city. But urban land is scarce, The reasons for failure are economic.
Won't e-commerce stir up the logistics expensive and regulated. Building extra handling hubs to bundle
scene? This forces alternatives such as changing products for distribution to the end user is
That’s a misconception because we tend the use of existing buildings or mixed-use costly. People used to invest grant money
to equate e-commerce with Amazon. options such as drive-thrus and pick-up – when it ran out, the projects vanished.
They forge ahead with services like stations. There are no universal location These days bulk shipping ensures a solid
same-hour delivery and use it to define financial base.
benchmarks that are unachievable for The second reason is that cooperation is
most companies. essential. The pressure was lacking in
The majority of retailers have one the past, now regulations require it – the
centralised warehouse per country or diesel ban in urban centres hangs like
region for e-commerce and do not the sword of Damocles over the industry.
establish their own granular logistics Perhaps we will still see a time where
networks. They rely on CEP (courier, CEP service providers share distribution
express and parcel) service providers to to end users in unaffiliated white
keep their next-day delivery promise. It electric vehicles.
Phots: Decathlon/JMA, Getty Images, Klaus Gruber
remains to be seen whether and where Third, logistics underwent an image
the mainstream needs to learn to change thanks to e-commerce, from
compete with Amazon. urchin to facilitator. That's why residents
as well as local government officials
What myths and fashions exist in logistics, are more open to tolerating them
and what trends are here to stay? in cities.
Drones and delivery robots will remain Alexander Nehm, Managing Director of
Warehouses of the French sports equipment manufacturer Decathlon (left) and UK department store John Lewis (right): spectacular exceptions. There are too Logivest Concept and advises both The interview was conducted by Rahel
Both companies use Click & Collect, a combination of online and brick-and-mortar retail at their own locations. many unclarified legal and insurance issues companies and local governments. Wilhardt.
10 places & spaces 2 | 2017 places & spaces 2 | 2017 11
PORTFOLIO A look at the most common investment vehicles
worldwide for indirect property investments shows how
varied preferences in different countries and among
Different countries, different types of investors are. By Anne Wiktorin invest in real estate and real estate
companies among other things. For
different packages
example, US investment giant Blackstone
used the money from one of its real estate
private equity (REPE) funds in early 2017 to
acquire German property group Officefirst
T
from IVG for an estimated €3.3 billion.
REPE funds have a longer history in the listed in Germany – ten years after their
he number is gigantic: Real estate funds particular, non-listed real estate funds are investments, insurance companies, pension US and UK; they took hold in continental introduction. One reason is that German
217,000,000,000,000 US dollars is This is the classic option for indirect the instrument of choice. INREV, the funds and provident funds prefer institutio- Europe in the early 2000s. In 2016, residential property companies are not
the value of real estate world-wide. property investments. The first products European Association for Investors in nal funds set up according to German law 290 REPE funds with total equity capital allowed to use the REIT as a legal structure.
To break it down, according to 2016 calcu- that transferred the equity investment Non-Listed Real Estate Vehicles, counted as a form of asset management for legal of $145 billion were issued – 15 percent
lations by real estate adviser Savills, the fund model to real estate were created 424 funds in Europe and North America at entities. The advantage is that the funds more than in the previous year according
value of housing, office buildings, stores, around 80 years ago. Real estate the end of 2016 with €276 billion in real are geared towards their specific require- to data from the Swiss investment
hotels, warehouses and agricultural land to- professionals purchase all types of estate assets. Funds based in Germany ments and investors have a significant say consultant Swisslake Capital. This vehicle
tals $217 trillion, or approximately buildings with capital collected from take the top spot: they alone hold real in investment decisions. At the same time, is particularly popular in North America:
€193 trillion. Less than half of that is investors and earn profits for their estate assets of nearly €75 billion, which the funds bring cost and tax benefits 158 funds totalling $63 billion in equity
purchasable and therefore of interest to customers from rental revenues, sales and corresponds to almost 27 percent. By compared to direct real estate investments. capital were issued there in 2016. Europe
investors: Savills analysts value this portion value appreciation of the property portfolio. contrast, US-based non-listed funds don't The numbers speak for themselves. had 71 funds with volumes coming to
at around $81 trillion. Two thirds of that They hold fund units that gain or lose value even reach the €5 billion mark – a clear According to the German Investment Funds $37 billion, and in Asia, 43 funds totalling
is residential real estate, while the other depending on successful management and sign of the preferences of national Association, BVI, €64.4 billion was invested almost $20 billion.
third is divided between commercial proper- the market situation. The unit price is investors. in German open-ended retail funds for
ties ($19 trillion) and agricultural land calculated by the investment management institutional investors in 2016. Open-ended
($8 trillion). A glance at the global stock company. The funds are not traded on the fund assets came to €87.6 billion.
market shows just how massive the stock market with just a few exceptions, REIT
investable real estate universe still is. for example in Switzerland. In Europe in Fund types: open- and In countries with a long tradition of stock
At around $55 trillion, the stock market trading, the stock market is also one of
reaches around two thirds of the volume closed-ended, and the top places for indirect real estate
of its real estate competitor. Clearly an institutional investments. One special corporate form
enormous investment amount – especially Open-ended real estate funds dominate has caught on for listed real estate
for investors who do not wish to become the European investor map. Two thirds of companies: they operate as real estate AG and SE
direct owners of buildings, but instead all non-listed funds in the industry investment trusts (REITs). The first REIT The reason real estate companies don't
prefer an indirect holding. A variety of association INREV's investment universe was introduced in the US in 1960, with always choose the legal structure of an
investment vehicles have been created over fall within this investment category. What global success coming four decades later. REIT is primarily strategic. As a traditional
the past few decades for them. They enable makes them distinctive is that the number The most important REIT features are that AG (a public limited company in German-
small investors to participate in the capital- of fund units to be distributed is unlimited, the real estate company must distribute the speaking countries), they do not have to
Illustration: Karsten Petrat
intensive real estate market and make it and the funds are regulated – quite strictly vast majority of its profits – in Germany completely distribute their profits in
easier for major professional investors to when it is a retail fund for small investors. 90 percent – as dividends to investors, contrast to an REIT. Instead, they can
spread their investment risks and lower the Closed-ended real estate funds are also who pay taxes on them. In return, no plough them back in. This enables them to
purchase and management costs. issued for private investors, but function business taxes are levied. As of the end set aside funds for future acquisitions or
differently from open-ended real estate of May 2017, 335 companies with market expansions, an important advantage in a
funds, as both the amount of fund capital capitalisation of €1.3 trillion are included capital-intensive industry like real estate.
and the investment period are limited. in the leading REIT index, the FTSE EPRA/ Since the end of 2004, many European
Additionally, the investment is considered NAREIT. North America is the heavyweight. companies have operated as a Societas
an entrepreneurial stake with a higher The 151 REITs traded there weigh in with Europaea (SE). This standardises the legal
minimum investment sum compared to an REPE funds a market capitalisation of €690 billion, basis for listed companies within the EU
open-ended fund, with a significantly Private equity (PE) means capital invest- followed by 80 Asian companies with and offers flexibility in the design of
higher risk of loss – as well as opportuni- ment in non-listed companies. PE funds €342 billion and 103 European companies corporate governance and employee
ties to profit. For their indirect real estate collect capital from major investors and with €210 billion. Only three REITs are participation. •
12 places & spaces 2 | 2017 places & spaces 2 | 2017 13
MARKETS France has turbulent economic and political times behind it.
But for real estate experts, the country remains firmly established on the
investment map. There are opportunities not only in the Parisian metropolis,
but in regional cities as well. By Christian Hunziker and Birgitt Wüst
Weathering
the storm
S ince the 14th century, the coat of arms for the city of Paris
has borne the motto: “Fluctuat nec mergitur”. Loosely translated
from Latin, it means “She is tossed by the waves but has not gone
under.” In a sense, this motto also applies to the French real estate
industry, as Schroders Real Estate investment firm reveals in a recent mar-
Global Head of Research at BNP Paribas Real Estate (BNPPRE). “The deal
flow is currently very huge,” he explains. That’s why Malle expects invest-
ment volumes of around €30 billion for the current year as well (see page
27, Investment climate study).
ket report. Even though the conditions in France and specifically in Paris Paris in focus
can sometimes be challenging, the French capital and the country as a For many years, approximately three quarters of investments in com-
whole are firmly established as a very desirable market for investors, mercial properties in France were made in the Paris metropolitan area
project developers and other real estate professionals. Figures from Real – no wonder, since France is such a centralised country where the
Capital Analytics (RCA), a research institute based in New York, under- capital city is the measure of all things in every respect. “Paris will
score its vital importance. They show that real estate investment remain the number one market for foreign investors given its size, li-
volumes in France totalled €29.6 billion last year, putting La Grande quidity, and product diversity,” insists Thomas Guyot, Head of Proper-
Nation in third place in Europe behind Germany and the UK. The fact ty Investment, France at Schroders.
Photo: iStock
that transactions fell by 22 percent in the first quarter of 2017 changes To prove his point, he indicates the size, liquidity and product di-
nothing about the positive growth effect, comments Richard Malle, versity of the Parisian market. Furthermore, the office space market in
the capital benefits from several special effects – for example, the boom
in the technology and digitisation sectors, notes Cécile Blanchard, Di- Office space in the Paris CBD
Peak yields declining nationwide rector of Real Estate Market Research with La Française Real Estate is running low with a vacancy
Growth of peak yields for top office properties in the most important Asset Management. “With (...) the gradual change of working space rate of only 3.2 percent.
locations in the Paris metropolitan area and key regional cities, in occupancy formats, central and well-connected locations are very much Project developers have
percent in demand.” Add to that the hope that Paris will benefit greatly from responded: according to JLL,
Paris metropolitan area the Brexit and the resulting weakening of London. The company in around 1.7 million square
8 charge of marketing the La Défense office quarter responded to the metres of new office space
Brexit vote with a creative and amusing advertising campaign featuring will come on the market
6 a frog with a tricolour tie and a slogan that clearly has London in its by 2019.
2ème Couronne
La Défense sights: “Tired of the Fog? Try the Frogs! Choose Paris La Défense.”
4 1ère Couronne But the Grand Paris Express infrastructure project will certainly
Croissant Ouest
Paris hors QCA
have the greatest impact on the real estate market there. It will build
2 Paris QCA an additional 205 kilometres of railway lines and 68 new train stations
in and around the Paris metropolitan area. “It should help to improve
Regional cities
the economic and property growth of the Île-de-France region, hence
8
Nantes generating many investment opportunities,” believes BNPPRE resear-
Toulouse cher Richard Malle. Union Investment Real Estate GmbH recognised
6 Strasbourg
this potential early on and at the beginning of this year acquired from
Bordeaux
Aix/Marseille The Carlyle Group the Grand Central development project at the Saint-
4
Lille Lazare train station in Paris. ▶
Lyon
2
Q1/2015 Q1/2016 Q1/2017
Source: BNP Paribas Real Estate, Research, April 2017
14
14 places & spaces 2 | 2017 places & spaces 2 | 2017 15
MARKETS “The Grand Central will be one of the most
modern and symbolic office buildings in
Paris after completion, and with the best
possible accessibility.”
Tania Bontemps, President of Union
Investment Real Estate France SAS
The Macron Effect
gently necessary because office vacancy in the Paris CBD recently fell
down to 3.3 percent. Spectacular major projects are also taking shape
around the rest of the country (see pages 18 and 19). The most im-
portant of these include Quartier Euroméditerranée in Marseille, The victory of political newcomer Emmanuel Macron, bolstered by stable economic growth, is having an
where the La Marseillaise office tower designed by star architect Jean
impact on France’s real estate market. By Myriam Chauvot
Nouvel is shooting skywards. Measuring 135 metres high, the
€200 million building will offer around 35,000 square metres of mo-
T
dern office space. he French market began the year in traditional political parties....including the All the stars are aligned for the youn-
In Nice, Compagnie de Phalsbourg is developing the urban area a state of disarray. The fear that the populist Front national. gest president France has ever had. He has
around Thiers-Est train station. In other major cities, train stations are populist politician Marine Le Pen, Emmanuel Macron now has free rein. a parliamentary majority and the rapidly im-
also becoming focal points of crucial urban development. For examp- fiercely opposed to immigration, European The business community is looking forward proving economy should support his reforms.
le, the Quai Ilot 8.2 office, retail and hotel complex is currently under free trade, and the euro currency, might win to the liberal reforms he promised, such as GDP growth is accelerating. According to
construction in Bordeaux – right near the new train station that ope- the presidential election led to unusual sit- a roll-back of regulations, a cut in social con- the IHS Markit PMI Index, in both April and
ned its doors in July and offers a convenient connection to Paris in just uations. “Between the two rounds of the tributions, and a lower corporate tax rate. May, the rate of increase in economic acti-
two hours. A new district is also taking shape in Lyon near Part-Dieu presidential election (April and May), sever- Macron had also pledged during the presi- vity hit a six-year high. The National Insti-
train station, where the project developer Foncière des Régions recently al foreign investors acquiring big assets on dential campaign to reform the labour law tute of Statistics (Insee) states that more
completed its Silex1 office building – which already has reached around the office market inserted a clause in the at once, in order to bring the unemployment jobs were created in the first quarter than
In Marseilles’ Quartier Euroméditerranée, the La Marseillaise 90 percent occupancy. Lyon, a city with close to half a million residents, contract making the completion of the trans- rate (9.3 percent as of this April) down to 7 at any time since 2010. In May, in the Eu-
office tower is shooting skywards. is already France’s second-most important real estate investment action dependent upon the outcome of the percent in 2022. This August, the National rozone “only France saw its pace of job crea-
location. According to the study recently published by the Urban Land election,” recalls Magali Marton, head of Re- Assembly voted on an enabling statute that tion accelerate,” writes IHS Markit. These
Institute and PwC “Emerging Trends in Real Estate Europe 2017,” search at Cushman & Wakefield in France. allows the government to skip the lengthy positive signals explain why the French real
The project offers 23,600 square metres of rentable space and the it is even more appealing than Paris from the perspective of inter- Investors breathed a sigh of relief at the legislative process and to reform the labour estate market remained dynamic in the first
station plays an important role in the Grand Paris infrastructure project. national investors. In a ranking of European cities, Lyon came in tenth, landslide victory of the staunchly pro-Euro- law by decree. “There are 3.5 million unem- quarter and will likely exceed expectations
“The Grand Central,” says Tania Bontemps, President of Union Invest- while the capital had to be satisfied with 17th place (out of 30 cities pean and liberal Emmanuel Macron, alt- ployed people and passing a law requires this year. “We are now anticipating invest-
ment Real Estate France SAS, “will be one of the most modern and in the study). hough the 39 year-old ex-Rothschild banker two years, it’s too long!”, explained Gérard ments of around 30 billion euros in 2017,
symbolic office buildings in all of Paris after completion, and with the (and François Hollande's former minister of Collomb, minister of Home Affairs, on TV, rather than the 27 billion we had initially
best possible accessibility.” Once it is finished in mid-2019, the proper- A question of returns economy) had never held an elected post two hours after LREM’s landslide victory. forecast”, says Magali Marton of Cushman
ty will be placed in the UniImmo: Germany portfolio. Nevertheless, many other locations also have their appeal, notes before. On the bond market, the spread bet- & Wakefield, France.
This is not the only project currently increasing the volume of office Stephan von Barczy, Capital Markets Director at JLL in France. “In a ween the French treasury bond (the OAT) Emmanuel Macron can enhance France's
space under construction in the greater Paris metropolitan area. context of strong demand and a lack of opportunities in most market and the German Bund, which had reached appeal. But the Macron effect is fragile. Re-
According to JLL, around 1.7 million square metres will come on segments in the Greater Paris Region and in Lyon, the main regional 75 basis points in April, quickly went back presentatives of the LREM do control the
the market by 2019. Expanding the inventory of rentable space is ur- markets are real alternatives and allow investors to diversify and ▶ to its normal level of around 35 basis points. National Assembly, but the majority of them
No one knew where “La République en Mar- are newcomers in politics and furthermore,
che” (LREM or “The Republic On The 40 percent do not belong to any political
Paris metropolitan area dominates investment Good prognosis for transaction volumes Move”), the party Macron founded in 2016, side. They might not stick to the presidenti-
Property investment market in France from 2015 to 2017, revenue by Revenue growth in the property investment market in France from would find candidates for the parliamenta- al agenda. Furthermore, only 43 percent of
Photos: Christine Ledroit-Perrin/Union Investment, Les Echos
region, in percent 2005 to 2017, in billions of euros
ry elections, but it did not matter: The “Ma- the French voted in this parliamentary elec-
Paris metro area Regions outside Paris Q1 Q2 Q3 Q4
75 cron effect” was born. LREM endorsed most- tion, which is the lowest voter turnout ever
25 35
30.9 31.8 31.8 ly candidates who had never run for for a national election. Hollande's minister
30 28.1 political office before (entrepreneurs, nurses, Myriam El Khomri, who tackled the labour
2015 25.8
25 etc.). Delighted voters gleefully seized this law reform in 2016, was not re-elected to
26 74
opportunity to solve a political conundrum: the National Assembly while Marine Le Pen
20 17.9 17.9
18.9
17.2
15.2
how to get rid of the old political order wi- made her entrance in the hemicycle for the
15 13.7
2016 thout putting populism in power? On June Myriam Chauvot, a well-known French first time after decades of futile efforts.
21 79 10 8.5 18th, LREM secured the absolute majority journalist specializing in finance and Should Macron displease, she stands in the
•
7.3
5
in the National Assembly, wiping out all the economics, lives and works in Paris. wings, willing to wait five years.
2017*
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
* Q1/2017 Source: BNP Paribas Real Estate, Research, April 2017
* Q2/2017 Source: BNP Paribas Real Estate, Research, July 2017
16 places & spaces 2 | 2017 places & spaces 2 | 2017 17MARKETS
find higher yields. However, investors remain selective and favor the
most mature markets, which boast levels of take-up above 100,000
square metres and low vacancy rates.” According to BNP Paribas Real
Highly prominent projects impress in Paris and the regions
Estate, peak returns for core office buildings in the Paris CBD fell to
3.15 percent in the first quarter of this year, while returns of 4.00
percent are quite realistic in Lyon. In other regional cities like Lille or From industrial zone to urban
A skyscraper cuts a fine The Grand Central project
– 20,000 square metres of
Toulouse, even 5.10 and 6.10 percent respectively are not uncommon.
The JLL expert believes Lille, Bordeaux and Aix/Marseille all belong in
quarter: the large-scale
Tribequa project will take
figure in Toulouse office and retail space at
Gare Saint-Lazare.
this category. Toulouse, Nantes and Rennes are other cities that many
experts think are worth taking a closer look at for investment purpo-
ses.
shape in Bordeaux in 2018.
A spectacular skyscraper
will climb towards the
clouds in the southern French
“I believe that this project,”
says Mayor Jean-Luc
Moudenc, “will give
Investment management companies are playing an increasingly metropolis of Toulouse over Toulouse a signature building
important role in the French investment market. Union Investment aims the next five years – the in keeping with its role
to grow with a portfolio of office, retail and hotel investment proper- Occitanie Tower, designed as a regional
ties in Paris and the rest of the country, but focusing primarily on the by American architect European capital.”
office market in the capital city. Asian investors – especially from Sou- Daniel Libeskind.
th Korea – are also very active in this area. Larry Young, Director of The unique feature on the
Photos: vrginlemon-presse, LUXIGON, L’AUTRE IMAGES
International Investment at BNPPRE, explains: “South Koreans inves- The client is the project building is a recessed spiral
ted almost €1 billion in the Île-de-France in 2016, and there are many developer Compagnie de on the façade running from
other deals looming with them and other Asian investors.” Experts vary Phalsbourg. Plans envisage a bottom to top. A lush
widely in their opinions on how returns will develop. Magali Marton, 40-storey, 150-metre-high hanging garden will be
Head of Research at Cushman & Wakefield in France, expects returns tower that will contain planted here.
to grow by 25 basis points by the end of this year, while Stephan von 11,000 square metres of office Studio Libeskind is working
Barczy at JLL believes a further decrease on exceptional assets with a space, 100 to 120 apartments, on realising the new garden
New business centre in the
strong Parisian character is possible. But one thing is absolutely cer-
tain: the French metropolis will never go under. • A new urban quarter for a Hilton hotel, retail space
and a panorama restaurant.
tower with Toulouse-based
architecture firm
heart of Paris
Bordeaux The massive project, estimated Kardham Cardete Huet.
O ver the coming years,
the massive Tribequa
a small area. According to
the design by Emmanuel
at €130 million, is part of
the city’s extensive urban
development plan around
Construction is slated to
begin in 2018 and the
tower is expected to be
T he Grand Central Saint-
Lazare project is currently
taking shape close to Gare Saint-
Rue d’Amsterdam in
January 2017.
construction project will Combarel from ECDM Matabiau train station. completed in 2022. • Lazare, Paris’ second-busiest The seller is The Carlyle Group,
create a new quarter in Architects, a three- or train station with around which has been developing
the city of Bordeaux in four-star hotel with 100 million travellers per year. the business centre since 2013.
southwestern France, 120 rooms and total area The new business centre with To prove its sustainability,
home to around of 4,200 square metres, around 23,600 square metres the project has earned an
250,000 people. 465 residential units, The Occitanie of rentable space will contain HQE (Haute Qualité
10,800 square metres of Tower in approximately 20,100 square Environnementale) “Excellent”
The project, which BNP Paribas office space and Toulouse metres of office and retail certificate as well as a
Real Estate (BNPPRE) and 1,650 square metres of retail includes office, space with three lobbies, two BREEAM “Very Good”
Bordeaux-Euratlantique Land space will line the Place hotel and restaurants, a bar and a certification.
Use Planning Institute d’Armagnac. The former retail space. public auditorium. Its special
presented at MIPIM 2017, Tri Postal building will also features include a public The project is slated for
encompasses more than be converted into a promenade, several terraces completion in mid-2019.
55,000 square metres in the 5,000-square metre conference stretching over 2,000 square The acquisition was made
Saint-Jean Belcier industrial and exhibition centre. metres as well as a living roof for the UniImmo: Germany
area. The new quarter is Marketing began in June 2017; that can be used for agriculture. open-ended real estate
following the trend seen BNPPRE plans to break Union Investment acquired retail fund.
An urban diamond for Nice: the new Thiers-Est train station throughout Europe of ground in the second the project located on the www.union-investment.de/
was designed by Daniel Libeskind. combining different uses in quarter of 2018. • Rue de Londres and realestate •
18 places & spaces 2 | 2017 places & spaces 2 | 2017 19You can also read
