Atlas Modified

I NTERNATI ONAL
I NVESTMENT ATLAS
S UMMARY
2011
CUSHMAN & WAKEFI ELD RESEARCH

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INTRODUCTION INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
2
The following report has been prepared by Cushman & Wakefield to provide an overview of activity in the global commercial
real estate investment markets in 2010 and an indication of activity in 2011.
The information used is based on initial estimates made in February 2011 and hence may be subject to change. Investment
volume estimates relate to commercial property only, excluding residential space and are based on recorded transactions in
each market place.
This summary forms part of a more detailed research report of global activity which includes market by market profiles for
the main areas of interest – showing the size and status of each and giving a flavour for the real estate sector and a brief view
on where each is heading. Details of the full report are given on page 13 of this summary, together with a range of contact points
for Cushman & Wakefield Research and Capital Markets globally.
Tokyo, Japan Dublin, Ireland Bogota, Colombia
3
GLOBAL INVESTMENT ACTIVITY
Market Summary
•
Global investment rose 42% in 2010 to US$564 bn
(€430 bn), the 3rd highest total of the past 10 years.
•
The recovery gathered pace in H2 2010 despite the
more hesitant economic mood of that time, possibly
reflecting the fact that liquidity and income are still
more important drivers of demand than growth.
•
Investment is forecast to rise just 5-10% this year,
hitting US$606 bn (€485 bn), led by North America,
with China slowing as policy is tightened. Overall
investment sales in Asia will grow further as other
gateway cities and some emerging markets attract
investor interest. Emerging markets generally will
remain in demand, with Latin American and Eastern
Europe forecast to see volumes rising by over 40%.
•
Yields fell in most areas in 2010 meanwhile, as higher
demand and limited supply impacted. The global
average fell 21bp to 7.6% and a further fall averaging
30bp is forecast for 2011.
•
Deal volumes are still only around 50% of their peak
but they are over 80% of their 5 year average and in
some markets are setting fresh highs – notably
emerging markets in Asia and Latin America.
•
Asia accounted for more than half of all global activity
for the 2nd year running and China is again the largest
global market. The US regained second spot from the
UK while Germany moved up to 4th.
•
The leading global city for investment was London,
followed by Tokyo, New York and Paris.
•
Volumes in the top 20 city markets grew by 59% as
investors focused on the strongest locations.
•
Gateway cities are clearly in very strong demand, with
a number benefiting not just from their status as safe
havens but also seeing or likely to see an earlier
occupational market recovery.
•
The global occupier market has in fact now started to
rally and rents rose 2% in 2010 but the recovery to
date has not just been polarised between prime and
secondary, it has led to a new tier of “ultra prime”
being used to reflect the much stronger demand for
the very best core properties.
•
While the economic and macro business environment
in 2011 has some upside potential, many core
investors will remain focused on these low risk icon
markets and on trophy assets within them. Such assets
typically also provide medium term growth potential
as they are sometimes selling at measurable discounts
to replacement cost.
•
More investors will start to seek out growth not just
security and some are looking at the growing
profitability of businesses and are getting ready for a
marked improvement in underlying market
conditions, M&A activity and bank-led sales.
•
We may not be set to see a flood of assets on the
market however, indeed quality supply shortages will
continue to frustrate buyers.
•
What is more, the US aside where there is ample debt
available for prime assets, many banks will be looking
to cut their property exposure in mature markets and
while other sources of finance are emerging, the overall
supply of affordable debt will still hold the market
back even whilst it prompts an increase in sales as less
debt is rolled-over.
•
In summary therefore, 2011 will be a challenging year
but generally one in which investor and occupier
demand for quality space will increase further and
pricing pressures will respond accordingly.
•
The market will remain polarised and the prospects
country by country are in fact growing more not less
diverse. Demand for new development in emerging
markets will grow while increasing interest in quality
second tier space may also be seen in mature markets
as well as a modest relaxation in investors’ definitions
of what is prime and what markets offer an acceptable
balance of risk and return.
•
The forecasts made in the report assume that events in
North Africa and the Middle East stabilise in the near
term and that the risk premium in oil prices does not
derail growth. Even assuming this however, some
investors and occupiers may need to revisit their
assumptions on macro and geopolitical risk, not to
mention giving greater weight to environmental and
natural risks in many areas.
0
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7.0%
7.2%
7.4%
7.6%
7.8%
8.0%
8.2%
Investment Volume Yield
H2 09 H1 09 H2 08 H1 08 H2 07 H1 07 H2 06 H1 06
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H2 10 H1 10
FIGURE 1 - GLOBAL COMMERCIAL PROPERTY
INVESTMENT VOLUMES (all sectors excluding residential)
Source: Cushman & Wakefield, RCA, KTI and Property Data
Regional Performance
At the headline level, all regions are following the same path of
improving performance and activity but as we started to see in 2009,
the scale and timing of changes does vary region by region with the
Americas ahead for investment growth, Asia for the occupational market
recovery, albeit now followed by the Americas, and EMEA and the
Americas seeing the most marked yield changes.
In terms of investment activity, the US was of course the largest
contributor to the out-performance of the Americas region, although
Canada matched the near 150% increase in US activity and Brazil did
even better, with a near trebling in trading. With regard to North
America this does come after a slower recovery than in Europe or Asia
in 2009, and over the recovery as a whole North America still has some
catching up to do, with volumes little more than a quarter of their 2007
peak compared to a global average of just over 50%.
Yields meanwhile are still falling at a steady pace in most markets and
dropped just less than 50bp in the Americas and Europe last year but to
a lesser degree in Asia, reflecting in part the earlier yield recovery seen
there but more particularly the fact that yields did not move out as far
in Asia during the downturn, particularly in emerging as opposed to
mature Asian markets. The fall for the Americas meanwhile is arguably
understating what many markets have witnessed, with US office markets
for example typically seeing yields compress at double this rate. On a
global basis meanwhile, while investors have focused on core markets, it
is emerging markets which have staged the strongest recovery. On
average emerging markets globally saw yields move out by 128bp and
have recovered nearly three quarters of this to date. Mature markets
meanwhile did not move quite as far, registering an average 106bp
increase, and have recovered 43% of this.
In the occupational markets, Asia and Latin America still lead in terms of
the pace of the recovery in activity, but Europe is also up strongly, with
office take-up increasing by around a third last year for example, while
North America is past its lows and vacancy has largely peaked. As a result,
rental trends have turned more positive but are again led by Asia, where
rents rose nearly 6%. The Americas is in the number two spot for rental
growth – at 2.6% - largely due to Latin America and Brazil in particular.
Stronger foreign buying demand is quoted as a feature in nearly all
markets, driving demand and very often pricing as well. The biggest
force behind actual deals done in many markets is domestic players
however, either because new sources of capital are growing, as in parts
of Latin America or Asia, or because local players are able to react more
rapidly to opportunities as they emerge, as in the USA and China.
Foreign players market share in fact fell further, for the 4th year running,
and now stands at 17.8% of the global market, its lowest in at least 10
years. Foreign buying was relatively stable in Europe and North America
but eased back in Asia and fell markedly in Latin America – averaging
just 21% as against a 5 year average of 52%. However, it must be
remembered that this does not capture the full foreign appetite – rather
it is due to the stronger demand coming from domestic players and the
fact that a lot of foreign money is channelled into the market through
local players – for example listed companies in Latin America, unlisted
pooled funds in Asia or REITs and third party fund managers in Europe
– or will come into a deal in a JV with domestic buyers after they have
secured the deal, as we have seen in some recent US transactions.
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
4
0%
20%
40%
60%
80%
100%
120%
140%
Americas EMEA APAC
Change in Investment (%pa)
-35%
-50%
-30%
-25%
-20%
-15%
-10%
-5%
0%
Americas Europe APAC
Prime Yield Change (bp)
-40%
-45%
1%
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2%
3%
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6%
7%
Americas Europe APAC
Prime ERV Growth (%pa)
FIGURE 2 - TRENDS IN THE GLOBAL MARKET IN 2010
(all-sectors excluding residential)
Source: Cushman & Wakefield, RCA, KTI and Property Data
TABLE 1 - THE GLOBAL MARKET IN RECOVERY
Investment Volumes Change in Yields (bp) Change in Face Rents
2010 Change on % of Recession Recovery Recession Recovery
US$bn 2009 peak Overall Overall Overall Overall
Europe West 144.9 56% 44% 132 -38 -5.6% 0.3%
Europe – Central & East 10.8 60% 40% 255 -167 -27.7% 2.4%
Middle East 2.8 -52% 30% 200 -80 -15.3% 0.0%
Latin America 7.9 63% 80% 144 -67 -5.8% 3.4%
North America 109.1 127% 26% 153 -71 -11.9% 1.9%
Emerging Asia 206.9 24% 172% 1 -57 -11.4% 6.1%
Mature Asia Pacific 87.5 37% 62% 63 -42 -14.6% 8.1%
GLOBAL 565.4 42% 53% 98 -55 -9.2% 3.0%
Source: Cushman & Wakefield, RCA.
Note: Middle East rental growth and yields for offices only. Other regions are all-sector. Rental levels referred to are face rents – effective rents fell more notably in most markets. Volume changes for EMEA based on Euro totals.
APAC
North America
Latin America
EMEA
0% 20% 40% 60% 80% 100%
Investment share in 2010
Domestic Cross border
Source: Cushman & Wakefield, RCA, KTI and Property Data
FIGURE 3 - CROSS BORDER INVESTMENT BY REGION (2010)
GLOBAL INVESTMENT ACTIVITY
5
Activity by Sector
Sector trends changed only marginally on 2009 but were typified by
increased demand for retail and industrial product. Retail is favoured in
some emerging markets but also in mature markets, notably in Europe,
where it is seen as a lower risk and less volatile asset. Logistics meanwhile
is favoured as a recovery sector given the trade-led economic cycle but also
in many markets due to the growth of internet trading and the need for
new logistics platforms to accommodate this. Office demand was little
changed but it did see a stronger pick up in the second half of the year –
growing by 46% between H1 and H2 versus a 33% pick up generally -
with increases in the Americas most notable. Better office demand came in
response to greater confidence in the underlying market but also perhaps
as a reflection of the stock that was actually available on the market to buy.
The increase in office demand was put to shame by the hotel sector where
there was a 119% increase between the first and second halves of last year.
North America was again a key driver of this but a doubling in activity was
also seen in parts of Asia and Europe not to mention the Middle East.
The most significant sector in the “other” category however is not hotels,
it is development land, and the increase in this market over the last two
years has been key to China’s rise in the global rankings. While the brakes
are now being applied to the stimulus measures which caused this, the
activity that it kick-started will continue to boost the market as planning
moves on to construction and eventually lettings and sales. This will make
China in particular, and Asia more generally, a key area of opportunity
for occupiers and investors over the coming years.
Whilst excluded from most of the volume data used in this report, multi-
family residential property forms a key part of the investment universe in
some areas of the world and a rapidly growing one in 2010, with
investment apartment sales hitting US$57.1 bn (€43.3 bn), 81% up on
2009. The USA is far and away the biggest multi-family investment
market, accounting for nearly 55% of total global trading. However a wide
range of markets have seen growing activity, with investors attracted by
the increased demand from tenants after many homeowners had their
fingers burned in the recession. Some areas are seeing increased supply as
public sector owners look to raise capital and this is one reason why
markets such as France and Sweden have seen increased activity and why
Germany is firmly in place as the second most active market globally (with
trading of nearly US$5 bn last year). What is more, with apartment sales
hitting 10.3% of the total for commercial space, up from 7.9% the
previous year, the sector is clearly becoming more significant and is coming
onto the radar of more investors.
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2009 2010
Americas EMEA APAC
5%
15%
Source: Cushman & Wakefield and RCA
FIGURE 5 – THE MULTI-FAMILY RESIDENTIAL
INVESTMENT MARKET
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Source: Cushman & Wakefield, RCA, KTI and Property Data
FIGURE 4 - SECTOR SHARE OF GLOBAL TRADING
Heron Parc, France
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
Investment Targets
China was again the most active global property investment market in
2010 but the acceleration in activity in the US has seen it move up to
second place, overtaking the UK, and if we exclude the development land
flows which dominate in China, the US would again be the largest global
market. However, while the contribution of land sales in China may slow,
with regulations on foreign and institutional property investment in China
being relaxed, its position as the 9th largest market for standing
investments is likely to improve.
The increasing dominance of Asia Pacific is underlined by the fact that
8 of the world’s top 20 markets are in that region. The relative
distribution of top markets globally has however been little changed on
last year, with two new entrants in the list – Brazil and Norway. Other
winners have been core markets such as Sweden and Canada, both
moving up 4 spaces, while the main losers have been smaller European
markets, Denmark and Belgium, which dropped out of the top 20, while
Spain and Italy fell back and South Korea dropped 8 places.
City Targets
Excluding land sales, London was the largest global investment market
for the second year running in 2010 – with the turnover of commercial
real estate rising 17% on 2009. Greater London saw US$21.1 bn
invested, with Tokyo second at US$15.6 bn, up 19%. New York, which
saw a near doubling in volumes to US$11.8 bn, reclaimed third spot
from Paris, with volumes of US$11.7 bn. New entries to the top 20 this
year included Frankfurt, Berlin and Stockholm in Europe, Singapore in
Asia and Toronto, Dallas and Chicago in North America and while 7 of
the top 20 are now Asian cities, it is also notable that the USA is the
most represented country, with 6 top 20 markets.
Gateway cities such as London, New York and Paris are clearly in very
strong demand. London in particular is benefiting from its growing
status as of the safest haven of the global market, with strong interest
from a still growing range of buyers from all corners of the world. What
is more, while the city has traditionally been one of the first ports of call
for investors looking at Europe, in this cycle it has also enjoyed an earlier
occupational market recovery and further good rental performance lies
ahead. A number of the other icon markets in the top 20 are in a similar
position, such as New York, Paris and Hong Kong.
6
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Source: Cushman & Wakefield, RCA and Property Data
FIGURE 6 - TOP 20 INVESTMENT TARGETS
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Source: Cushman & Wakefield and RCA
FIGURE 7- TOP 20 CITY INVESTMENT TARGETS (EXCLUDING DEVELOPMENT)
Budapest, Hungary
GLOBAL INVESTMENT ACTIVITY
7
Asia Pacific
The Asian recovery broadened in 2010, with most countries performing
well economically and positive rental growth in all sectors, with prime
rents overall up by 5.9%. Investment volumes rose 27% to US$294 bn,
12% higher than their previous peak in 2007, while yields compressed by
20 basis points overall, led by falls for prime retail.
China has been pivotal to the economic recovery in the region and after
taking the crown last year, the Middle Kingdom remains the biggest global
property investment market overall (albeit as noted this assumes
development land acquisitions are included which accounted for 95% of
all investment activity last year). In terms of growth and performance
meanwhile, Hong Kong has been the leading market for rental growth for
retail and offices while India and Singapore have led for industrial.
Mainland China has seen good growth in the retail and office segments
while India, Japan and Taiwan performed well in retail. Some markets
within the region have however seen rents reverse, with falls in the office
segment in Japan, Malaysia and New Zealand for example.
The retail sector led the stabilisation of the Asian market in 2009 as
stimulus measures were enacted. As 2010 progressed and the regional and
global recovery continued however, the office market arguably took over.
Grade A availability is down and rents have started to rise again, hitting
an all time high in Beijing for example and financial services tenants are
again driving expansion in cities such as Shanghai, Singapore and Hong
Kong. The office market has been a key target for investors as well,
although strong competition for assets has led to growing demand and
activity in other sectors, with retail and apartment sales rising through
most of the year and hotel demand also strong.
Foreign activity was up in the second half of the year, averaging 15% of
all trading versus 11.7% in H1 2010, but this is still down on 2009 and
well down on the average for the previous 5 years (26%). Increased
demand from institutional players from North America and Europe has
been seen, as well as from Sovereign Wealth Funds, but most foreign
demand is from regional players and this is likely to continue as real estate
is increasingly accepted by APAC funds as part of their multi-asset
portfolios. At the same time, opportunistic funds from North America
and Europe have new allocations and are actively scouring the markets
and we also anticipate the re-emergence of core investors from Europe and
North America in H2 2011.
Investors have in general been encouraged by an increasingly active occupier
market meanwhile and have been ready to take on larger lot sizes as some
rush to get into the market. At the same time however, as talk of policy
tightening has increased, there has also been something of a flight to quality,
with the greatest competition being for the best assets in the top cities.
To date activity has remained strong despite the measures put in place to
slow the market. There will be some cooling in the residential sector,
mainly in China, Singapore and Hong Kong, as governments become
more sophisticated at enacting policy specifically aimed at reducing
speculation in this sector rather than a catch all for the entire property
market. Deregulation in China has led to increased demand as restrictions
governing foreign and insurance company investment have been loosened
meanwhile. A lot of local money is also looking more widely at investment
opportunities and while much will stay within the region, some is going
further afield. Interest in emerging markets and resource rich areas in
Africa or Latin America is well-publicised but there is also increased
interest in areas which can offer diversification benefits, such as the USA
and Europe.
While overall economic growth is likely to slow this year as stimulus
measures run down and policy is tightened, forecasts still point to stronger
growth in the region than in most other areas and to a further broadening
in growth towards domestic consumption. Good consumer demand may
therefore be a feature of more markets in 2011 although measures to
dampen inflation may hit consumers at some point. Further employment
growth will certainly benefit the office sector in leading services and IT
markets around the region and increased corporate demand from external
companies looking to expand is likely. Hong Kong, Melbourne and
Singapore will remain the tightest office markets in the region while
markets such as Shanghai and Mumbai may see rents weaken as a more
notable upturn in new supply is seen.
Investment demand is likely to remain strong despite rising interest rates
and further efforts to cool capital flows in some areas. Fund and company
capital raisings in 2010 mean many investors have cash to invest and a lot
of private investors will also be looking at real estate as they seek to diversify
their assets. What is more, while debt is less important in the Asian
property market generally, conditions in the credit market have clearly
relaxed further and spreads are back to pre-crisis levels. Investment will
remain focused on the more established centres such as Hong Kong,
Singapore, Shanghai, Tokyo and Sydney and these markets could see a
further increase in investment activity as higher prices attract vendors to
the market. However the total volume of transactions that includes
development land is expected to slow as tightening policy in China aimed
at the residential sector in particular, leads to reduced activity in this
segment of the market.
Hong Kong
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6.9%
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7.7%
Investment Volume Yield
H1 10 H1 09 H2 08 H1 08 H2 07 H1 07 H2 06 H1 06
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FIGURE 8 – APAC COMMERCIAL PROPERTY
INVESTMENT VOLUMES (excluding residential)
Source: Cushman & Wakefield and RCA
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
8
EMEA
EMEA investment rose nearly 50% in 2010 to US$155 bn (€120 bn)
with Central & Eastern Europe (CEE) up 60% and the West 56%. The
Middle East continued to suffer from uncertainty and a mismatch
between buyers and sellers, resulting in a 52% fall in volumes. In Africa,
activity fell 31% after the region’s main market, South Africa, saw
something of a World Cup hiccup, with volumes starting the year well
but failing to keep that momentum.
Investor demand picked up late last year after a slower summer period as
sovereign debt worries impacted. Demand has remained focused on the
most liquid markets, with the UK, Germany, France and Sweden seeing
most activity and aggressive bidding on core assets. Nonetheless, as yields
in these markets have fallen, some have started to turn their attention to
other areas, such as Poland for example. Indeed, for those seeking short
term returns and unhappy at pricing in stronger rental growth, the new
level of yields in core markets appear too expensive and they are having
to move up the risk curve. Russia and Turkey are seeing increased demand
and the rest of Central Europe not to mention Romania and Bulgaria are
also starting to see some interest and may offer the distress investors have
been looking for while still offering the security of being in the EU.
Many investors will however remain more focused on core, with some
reducing their return requirements and being ready to bid yields down
further in the best markets. With debt still limited, interest in core plus
stock should also increase as the occupational recovery makes active
management a real possibility. To date, a range of office markets have
started to see better patterns of demand for example, albeit still often for
replacement space, including London and Paris as well as Stockholm,
Warsaw, Moscow, Oslo, Zurich, Berlin, Dusseldorf and Munich. In the
industrial market, logistics driven demand is causing interest and most
large hub cities can offer potential as distribution patterns change and
attractive yields remain in place. France and Sweden are performing well
at present but Germany is likely to improve and parts of Central &
Eastern Europe will bounce back as confidence improves. In the retail
market, core western and northern Europe are again preferred, including
London if not perhaps the rest of the UK, as well as some areas of Central
& Eastern Europe, with high street and dominant shopping centres
performing best.
Finance markets have relaxed in most areas with better access to debt
reported, albeit still differentiating between property and borrower quality
to a marked degree and further improvement will be slow as Basle III
requirements are introduced. LTV ratios are back up to 60-65% for prime
property and margins are settling in a broad range of 150-250 bp, with
banks using the covered bond market able to charge the lower margins. A
lot of loan repayments have been rolled over and hence loan books remain
higher than banks - and indeed many central banks - would want. As a
result, many are still tightening their lending standards or leaving the
market and refinancing and covenant breaches are now slowly being acted
upon, with more bank controlled assets coming to the market. Investor
demand for such stock is high either to take out the debt or the asset
directly, although there is still a mismatch in expectations between buyers
and the banks on quality and pricing.
CMBS markets have stabilised but will in no way take the place of banks
leaving the market. A number of funds are now seeking to provide
funding, often mezzanine debt, and the first signs of greater interest from
insurance companies is also being seen, in part driven by regulatory
changes. This will help to fill the funding gap to some degree but far from
completely and it will remain the case that debt for riskier propositions
such as development will be very limited and many secondary markets
will be starved of debt. Equity will in fact need to take the place of debt
in more of the market, helping to open the way for an increase in foreign
investment in some areas, as global pension and sovereign wealth funds
target trophy assets.
The region can not rely on a smooth economic recovery to drive the
property markets, with policy-makers in many areas taking early action
to roll back the stimulus spending which propped up the economy in
2008-10, and to bear down on inflation threats and support the Euro.
As a result, there are downside risks to growth and more particularly, we
can expect a further marked degree of polarisation between the best and
the laggards. Nonetheless, the employment market in parts of Europe
has proved quite robust and with corporate investment rising, the best
markets may see a quicker return of expansion demand than many
currently expect.
Outside Europe, whilst the Middle East and Africa as a whole lagged
the global property recovery last year - with investment volumes falling
43% - some markets, including Egypt and Morocco - did manage to
buck the trend and a number are in fact being identified as offering
interesting long-term potential. The current upheaval across the region
has therefore come at a bad time for the fledgling property investment
market and the uncertainty alone will clearly divert a lot of interest to
other areas in the short term. On a more hopeful note however, it may
well be a catalyst for much greater future engagement with the region
and may in some cases open the way to an increase in foreign investment
over the medium to longer term.
In the Gulf, confidence started to improve in the latter months of last
year, with increased investor appetite focused on quality, well-let assets
and some increase in occupational activity as tenants took advantage of
the market. Yields appear to have stabilised although a lack of transactions
masks this to some extent and hence a gap still exists in some markets
between buyer and seller opinions. Nonetheless, a combination of
increased local demand and more foreign interest, particularly from Asia,
is expected to bolster some GCC markets once the current situation
stabilises. At the same time, the
flow of outward investment from
the region is likely to increase.
Many of the biggest investors in
the area will not be panicked by
recent events but it will clearly
underline the advantages of
diversification into more stable
areas and strong, liquid global
gateway markets for low risk
long-term buyers will benefit.
0
50
100
150
200
250
6.0%
6.5%
7.0%
7.5%
8.0%
Investment Volume Yield
H2 09 H1 09 H2 08 H1 08 H2 07 H1 07 H2 06 H1 06
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FIGURE 9 – EMEA COMMERCIAL PROPERTY
INVESTMENT VOLUMES (excluding residential)
Source: Cushman & Wakefield, RCA, KTI and Property Data
Copenhagen, Denmark
Latin America
Investment activity in Latin America rose 63% last year, to US$7.9 bn,
with a particularly strong increase in the second half of the year taking
volumes back to within 20% of their 2007 peaks. Recent economic
performance both in terms of growth and risk have encouraged more
occupier and investor interest in the market. Rental markets are generally
tightening, with prime rents up 3.4%, led by offices, while yields edged
down by 28bp, albeit still some 70bp higher than their levels at the peak
of the market in 2007.
Brazil is very much the centre of activity, taking 77% of all investment
in the region and increasing by 240% on 2009, with Sao Paolo the most
active city market. A number of smaller markets in Central and South
America also recorded strong increases in activity, notably Peru and
Argentina as well as markets such as Costa Rica and Puerto Rico.
Nonetheless, the picture is very mixed across the region, with relative
heavyweights such as Chile and Mexico seeing volumes fall alongside
declines in less mature markets such as Colombia – albeit demand there
is good, but with supply not always matching. Indeed, whilst more
investors are becoming less risk averse and are seeking out growth
opportunities, it is clear that not all markets can offer the stock investors
are seeking and buyers in general are still highly selective. In Mexico for
example, more buyers are now evident, still typically equity driven but
with increasing activity from the debt market as well. Buyers are often
seeking distressed assets, in the hospitality and resort markets for
example. High net worth individuals and US institutional funds are
showing most demand, while pension fund investment into debt and
fund vehicles is also increasing.
Local players were the key to the increases seen in most areas last year,
with domestic buying up by 148% while foreign buying actually fell
back by 28%, in part due to the increased competition from local buyers.
However, while demand from private investors and steadily increasing
local institutional demand is clearly a factor in many countries, the
increased flow of funds into the regional stock market and the number
of successful IPO’s is perhaps key, and many international players are
clearly choosing this route to invest in the region.
Solid economic growth should translate into a further improvement in
real estate market demand in 2011/12 both from occupiers and investors
and the regions favourable demographic outlook and resource backing
will help to make this a medium term not just a short term trend.
Investment activity in particular could be good, as listed companies,
local investors and funds as well as foreign buyers target the market and
debt and equity increase in volume. Investment via the public market
may still be preferred in some areas but a growing range of markets are
likely to be targeted regionally. In the larger markets, and Brazil in
particular, some of the biggest regional and global investors will however
be looking to make a direct investment. In Mexico it is in fact estimated
that US$18bn was raised last year by local and US investors to target the
real estate market, with 80% of this to focus on the industrial sector
which is seen as the next star performer.
North American investors are in fact frequently targeting industrial
projects in the region, while European investors are most attracted to
retail and hospitality and Asian investors are making a play in the
infrastructure market. At the same time, an increasing outward flow of
investment is likely, starting from Mexico, into the wider region and
beyond, as high net worth individuals as well as companies and
institutions seek diversification opportunities.
Trends are however likely to remain mixed, market by market and
between different sectors. Consumer demand generally is growing well
and increasing job creation, credit growth and confidence will add to
retailer interest in the market, generating areas of rental growth and
further development, notably in Brazil, Chile, Peru and Colombia.
Retailer expansion plans are more than keeping pace with supply and,
indeed, in Brazil in particular, corporate activity is seen as a route to
enter the market, often by other regional players. Argentinean demand
is likely to pick up this year and Mexico is also now improving, which
will spur the development sector further and may restart some of the
stalled schemes seen across the country.
Hospitality markets are in demand in some areas, such as Mexico and
Brazil, while residential remains a hit market in most countries, with
government incentives benefiting the low cost market, particularly in
Brazil, and credit and income growth benefiting medium to high cost
market segments.
In the regional office market meanwhile, trends are more mixed.
Demand is up but so too is supply in some centres and hence growth and
performance will very much be reflective of local supply patterns, with
Rio de Janeiro, Sao Paulo, Lima and Santiago in the best position for
growth at the moment, while growth has slowed in Bogota, Mexico has
rising vacancy levels, albeit largely focussing on just the Santa Fe market,
and growth is also subdued in Buenos Aires and Caracas.
In the industrial market, record levels of production in Mexico will be a
spur to the real estate sector as noted while in Brazil, strong absorption is
already pushing vacancy down and rents are under pressure to rise.
Particularly in these two markets but also in areas serving cities across the
region, rising demand is expected and development opportunities are being
pursued, even of a speculative nature. Those markets with the most elastic
supply pipelines should therefore be carefully researched prior to entry.
GLOBAL INVESTMENT ACTIVITY
9
Mexico
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3
4
5
6
8
7
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
Investment Volume Yield
H2 09 H1 09 H2 08 H1 08 H2 07 H1 07 H2 06 H1 06
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H2 10 H1 10
12.5%
FIGURE 10 – LATIN AMERICA COMMERCIAL PROPERTY
INVESTMENT VOLUMES (excluding residential)
Source: Cushman & Wakefield and RCA
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
North America
The recovery in the North American real estate market is gaining
ground, with investment volumes up by 127% and yields now
recovering half of their losses from the recession. While still dependant
on a further improvement in the health of the economy, downside risks
are now more balanced by upside potential. Not all areas of the market
will be as well placed of course. Conditions stabilised first in the
hospitality and residential markets for example, but other sectors are also
on the way back, with rents rising 1.3% last year, led by prime retail in
both Canada and the US, with office and industrial markets stable to
improving by year end.
The Canadian market recovered well in 2010, with investment up nearly
150%, yields falling over 50bp and rents stabilising and increasing in
some segments as occupier demand firmed and employment regained
the ground lost in the recession. Performance was however very varied
across the country with the resource rich west performing best but
central Canada improving, primarily due to better demand south of the
border. While demand is likely to increase in 2011, the impact will be
subdued by record levels of vacancy and will vary by market, typically
with CBD office markets outperforming suburban areas where supply is
higher. Strong levels of investor demand meanwhile have been met by
a mild increase in supply, although a lot of Canada’s big investors are
continuing to look abroad to access a greater pool of investment
opportunities. In Canada itself, Vancouver and Toronto are favoured
over Calgary which has not yet stabilised, while Montreal is currently a
more locally driven market. The banking sector is acknowledged to be
among the most stable globally and improved debt availability has clearly
helped the market, with margins stabilising at 160-180 bp and LTV
ratios stretching up to 70%, although 50-60% is still typically more
comfortable for most lenders.
In the US, an improvement in the fundamentals of the sector is helping
the investment market to turn a recovery into a rally – albeit focused on
major prime areas, with much less activity in second tier markets.
Occupational market performance in 2010 was still, at best, subdued in
terms of rental growth or net absorption, but it does of course lag
economic developments and assuming job creation is now picking up,
the portents in the latter part of 2010 were increasingly favourable, at
least with respect to quality, affordable space.
Investor interest is still heavily polarised between core property on the
one hand and distressed assets on the other. Demand for core properties
is far in excess of supply and as a result, pricing has corrected much more
rapidly than has historically been the case. The flow of distressed assets
meanwhile failed to live up to expectations as lenders continued to
“pretend and extend”, but as the strategy has paid off and values have
staged a dramatic recovery with a firming economy, more distressed assets
have begun to come to market. As an example 20% of Cushman &
Wakefield’s pipeline in 2010 represented distressed assets and the velocity
of transactions has picked up into 2011. Bargains from distress are
therefore slowly increasing in number. At the same time, with limited
development in recent years, Grade A availability will decline quickly if
employment growth matches expectations and more attention will start
to focus on second tier locations more rapidly than some expect.
Finance markets have steadily thawed, with CMBS markets showing the
most marked improvement, albeit at much weaker levels than in
previous years. With potential losses being over estimated in 2009, the
recovery in values for some debt backed securities has been very
significant and this has helped improve sentiment. New lending sources
are also expanding again, led by insurance companies and some non-
domestic banks, and lenders are also being less risk averse, although
development finance is still hard to find. Typical loan to value ratios
remain low, at circa 50-60% and margins have come in. As in Europe
however, refinancing requirements are going to remain a challenge over
the next 2-3 years, particularly for smaller banks who reputedly have
made less progress in dealing with troubled loans that the bigger banks.
What is more, as banks and others compete to lend or parcel up
securitised debt, there are concerns as to whether underwriting standards
will be relaxed too quickly, particularly with respect to secondary
property and secondary locations.
In the retail market, while prime rents have increased, average vacancies
are still at record highs, regional centres are out-performing local or
neighbourhood schemes, competition is up and bankruptcies, while
slowing in number, are still impacting. Similarly in the office market,
vacancy may have peaked but net absorption is limited and tenants and
investors are mainly focused on the gateway cities, notably New York,
Washington and Boston. These are the most secure office markets but
some second tier markets may give higher short to medium term growth,
particularly knowledge driven markets. Warehouse markets also face an
overhang of space in general, but vacancy rates are improving after
hitting record levels in many markets in 2010, and there is increased
demand for modern space in the largest transport hubs around the
country as well as further afield, eg in Toronto or Mexico.
While to date much of the stock released by banks has been in smaller
lots, ongoing workouts will release a steadily growing volume of
opportunities and this is key to our optimistic forecast of a 50% increase
in trading this year. A variety of players will be active in the coming year,
with domestic players likely to be dominant. Increased fund demand is
being seen for example, with more pension and insurance funds targeting
real estate debt and equity and some planning to increase their US focus
rather that invest internationally. REITs are sitting on some of the record
volumes of capital raised in 2009
meanwhile and they are sure to be
key players in some segments of
the market, both in terms of
direct acquisition and corporate
activity. Foreign demand has also
increased in the past year but a lot
of international players are
finding it hard to compete with
the pricing offered by US players
and to match the speed of
transaction which locals will
commit too.
Toronto, Canada
10
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150
200
300
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6.0%
6.5%
7.0%
7.5%
8.0%
Investment Volume Yield
H2 09 H1 09 H2 08 H1 08 H2 07 H1 07 H2 06 H1 06
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FIGURE 11 – NORTH AMERICA COMMERCIAL PROPERTY
INVESTMENT VOLUMES (excluding residential)
Source: Cushman & Wakefield and RCA
GLOBAL INVESTMENT ACTIVITY
11
The 2011 Outlook
2011 will clearly throw up more challenges for the global real estate
market but in our opinion, there are upside risks to consider as well, not
least in the potential for economic recovery to be sustained and for
increasing levels of business and financial confidence to translate into
greater than expected levels of market activity.
Different countries will continue to develop at different speeds however.
Stronger balance sheets and prime supply shortages may be common
drivers in most areas but factors such as underlying economic growth,
occupier demand and rental potential, the relativity of yields and financing
costs and the depth of availability of new finance, do still vary significantly
and both growth and risk levels will remain unequal as a result.
The Occupier:
•
Leasing volumes will increase and while much will still be driven by
replacement and improvement rather than expansion, cost cutting
will no longer be at the top of the agenda for all corporates.
•
Increasingly healthy balance sheets will be a driving force for
companies to look for new areas of opportunity, including mergers
and acquisitions and renewed targeting of emerging markets.
•
Cost is of course still important and with profit margins under
pressure, there will be a focus on the most effective markets in all
sectors and as a supply squeeze pushes rents higher, possibly at a faster
rate than expected in top markets, some occupiers will turn towards
segments of the secondary market.
•
A shortage of new development and falling Grade A vacancy in
Europe and North America will set the scene for a return of rental
growth but overall high vacancy and cost consciousness will keep
growth rates down, probably averaging 3-5%. In Asia and parts of
Latin America rents have started to gain some momentum and
increases of 5-10% are anticipated this year, although the elasticity of
the supply pipeline means growth will be volatile and is likely to slow
in 2012/13.
TABLE 2 - THE GLOBAL MARKET BY REGION IN 2011
Investment Volumes Change in Values in 2011
2011 Change on Prime Prime
US$bn 2010 Yields Rents
Europe West 160 13% -15 to -35 bp 3 to 5%
Europe – Central & East 15 49% -30 to -60 bp 5 to 7%%
Middle East 4.2 50% -15- to -35 bp -4 to -6%
Latin America 11.2 41% -25 to -55 bp 6 to 9%
North America 147.3 35% -25 to -45bp 2 to 4%
Emerging Asia 176 -15% 0 to -25bp 7 to 10%
Mature Asia Pacific 88.8 1.5% -10 to -30 bp 4 to 6%
GLOBAL 605.3 7.2% -30 bp 3 to 5%
Source: Cushman & Wakefield, RCA
Note: Middle East rental growth and yields for offices only. Other regions are all-sector.
Volume changes for EMEA based on Euro totals.
Heron Tower, London EC2, UK
Istanbul, Turkey
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
12
The Investor:
•
Property yields still look attractive relative to interest rates overall and
together with excess demand over supply, this will encourage further
yield compression in select markets. In North America and Europe,
core yield levels are likely to stabilise and secondary assets may weaken
but in the middle ground there is scope for compression once market
confidence improves.
•
The historically low levels of interest rates in most countries has held
down the cost of capital for property and reduced target return
expectations, making property more appealing particularly when
compared to fixed interest investments. Rising interest rates as more
countries look to tighten policy could therefore hit property demand
but at the same time, higher rates will be a sign of a more normal
economy which is positive for quality property - albeit that some core
assets may still see a negative re-rating when risk appetites increase.
•
In terms of investment activity, we anticipate higher levels of supply
and demand as well as a steady increase in the number of risk takers
in the market despite an ongoing shortage in debt in some areas.
•
Finance markets will remain an area of concern, with the write down
of secondary debts clearly having further to go and banks in many
areas likely to cut further the size of their loan books. Asia may remain
the exception to this as spreads reduce and LTV’s increase with new
funding sources on the rise.
•
The emergence of alternative lending sources will potentially be a
major change in the landscape of the market over the next few years
meanwhile, with greater involvement from long term mortgage banks
and issuance companies, fund and investor involvement in riskier
areas of lending and new structures of securitised debt with a clearer
look-through to the assets below.
•
Investment supply will increase as developers and existing investors
realign portfolios and some take profits. At the same time there also
clear signs that banks and debt services are ready to take action, which
will bring more secondary stock to the market but also more Grade
A product.
•
Nonetheless, investors will still face a shortage of the supply the want
and will need to make compromises to invest. One such compromise
may between the level of income and the security of that income.
Another will be in how they define prime – and as ever the line
between prime and secondary will get pushed back as confidence
levels improve.
Investor Strategies:
•
The market will remain polarised but increasingly it will be too
simplistic to say it is “two tiered” – it will be multi-tiered as the
compromises of occupiers and investors drive different segments of
the market.
•
Many investors should look to push diversification back up their
agendas: by region, country, sector and currency as they attempt to
keep risk at manageable levels while still enhancing returns.
•
Retail is increasing in popularity as investors view it to be a lower long
term risk asset and while emerging markets are growing strongly the
sector may be more subdued in other areas, by issues such as
de-leveraging in the USA and austerity cut backs in parts of Europe
for example.
•
Opportunities in hospitality, logistics and multi-family property are
also being keenly pursed as are other sub sectors where income is
secure and growing, such as healthcare in some markets. Office
meanwhile are less favoured by some but with supply-led cycles
kicking-in in many global markets, the outlook for growth in this
sector is improving, particularly in the global hub markets.
•
In all sectors, buying debt from a finance institution seeking to reduce
its loan book exposure to real estate may be a good way to get to assets
offering upside while potentially providing a better than current
equity yield until control of the asset can be achieved.
•
With strong competition for prime assets, investors may look towards
destabilized assets in these core markets, either with equity or debt
infusions. Some of the more stable secondary markets will also be able
to deliver good risk adjusted returns and such opportunities may
emerge first in a market such as the US as CMBS financing returns.
•
Over the medium term, emerging markets are likely to continue to
perform well due to factors such as urbanisation and population
growth, the increasing size and affluence of the middle class, increased
industrialisation and resource exploitation, increased raw material
pricing and financial market maturity and development.
•
In the short term however, with pricing up in many emerging
markets, the risk premium is limited and with inflation a growing
problem and developed world demand hardly to be taken for granted,
that is clearly a factor investors need to weigh carefully. What is more,
all emerging markets are far from equal in terms of property supply
and business risk and investors should continue to address this in the
returns they demand.
•
Macro risk factors in all markets should in fact be higher up the agenda.
Not only should investors be acutely aware of geopolitical risks
following recent events in the Middle East and Africa for example, they
should also be looking at other areas of risk which have impacted in the
recent past, be that from fire or floods or other natural forces.
•
Inflation is clearly a concern in many countries, particularly in some
emerging markets, but while it will remain an economic factor of
note, investors should also be alert to social and political dimensions
of this risk, particularly if pricing increases in markets where
consumers are least able to cope.
0
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1000
1200
APAC EMEA North America Latin America
2009 2008 2010 2007 2006 2005 2004 2003 2002 2001
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2011
FIGURE 12 - GLOBAL COMMERCIAL PROPERTY
INVESTMENT BY REGION
Source: Cushman & Wakefield, RCA, KTI and Property Data
THE FULL REPORT INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
13
The full report from which this summary is taken provides an introduction to the world’s key investment markets for
real estate. A total of 51 locations are reviewed with market by market profiles as outlined below.
Markets Covered:
Argentina
Australia
Austria
Bahrain
Belgium
Brazil
Bulgaria
Canada
Channel Islands
Chile
China
Colombia
Croatia
Czech Republic
Denmark
Finland
France
Germany
Greece
Hong Kong
Hungary
India
Ireland
Israel
Italy
Japan
Following an unsettled 12-18 months the property market is
improving alongside the economy and investor confidence,
reflected in higher investment volumes in 2010 (up 15%on
2009). Yields stabilised over 2010 but investors continue to
strongly favour prime product, with the secondary market
registering limited activity.
In the occupational sector, the market has reached the bottom
of the cycle with retail and industrial leading the office sector
in recovery. Office occupancy was weak in 2010 in Auckland
and Wellington CBD as well as suburban markets, although
future new construction is very limited which will help rectify
the situation. The majority of new space is pre-let and the
future challenge is to clear the overhang of vacated, largely
secondary space.
2011 should see property fundamentals stabilise further with
no major movements expected in rents, yields or vacancy and
all economic indicators improving especially over H2 2011.
Volumes should be further supported by the availability of
capital, although lending conditions remain tight with second
tier and speculative lending opportunities limited. Product
will stem mainly from funds and institutional owners who
continue to rebalance their portfolios as well as banks and
receivers dealing with distressed property holdings. Domestic
investors will continue to dominate with owner occupation
significant. Foreign interest in the market stems from Asia,
and to a lesser degree, Australia with interest expected to gain
further momentum in 2011 leading to higher levels of
transactions.
1
1
1
3
3
1
1
North
Island
South
Island
WELLINGTON
AUCKLAND
Whangarei
New Plymouth
Napier
Hamilton
PALMERSTON NORTH
Nelson
TAUPO
CHRISTCHURCH
DUNEDIN
Invercargill
Picton
Timaru
Kaikoura
Rotorua
NEWZEALAND
NEW ZEALAND INTERNATIONAL INVESTMENT ATLAS 2011
Population 4.4 mn
Top Cities
Auckland 1.4 mn
Wellington 390,000
Christchurch 390,000
2010 estimate
GDP US$139 bn
GDP per Cap US$27,660
GDP Growth 2.5%
CPI Inflation (average) 2.5%
10 yr Bonds (yr end) 5.9%
Unemployment (average) 6.3%
Politics
The ruling centre-right National
Party is lead by Prime Minister
John Key. The next Parliamentary
elections are due in November 2011.
KEY DRAWBACKS
I Geographically isolated and
small market size
I Rebalancing still resulting in
forced sales of distressed
property
I Domestic institutions not yet in
acquisition mode
I Strong New Zealand dollar
exchange rate is holding back
offshore investment activity
KEYATTRACTIONS
I Straight forward land title system
I Low interest rates
I Bottom of the property cycle
reached
I Supply side growth limited as
construction levels remain
subdued
THE COUNTRY
41
Sale of Rialto cinema and retail complex in Newmarket, a suburb of Auckland,
through a combination of auction and tender processes
A passive offshore investor does not
pay any stamp duty or capital gains
tax in New Zealand on any profit
made on the sale of a property.
There are also no exchange controls
effecting remittances to and from
New Zealand.
Transfer Tax 0.00%
Notary n/a
Legal 0.50% - 1.00%
Agency 3.00%
Other n/a
TRADING COSTS
2009 InvestmentVol. €2,004 mn
2010InvestmentVol. €2,303 mn
Change from2009 14.9%
Interest Rate (Dec 10) 3.00%
Currency (Dec 10) US$1=NZ$ 1.28
€1=NZ$ 1.72
Rent Measurement NZ$/sq.m/yr
PROPERTY MARKET
7.00%
Industrial Shops Offices
6.00%
8.00%
9.00%
2006 2007 2010 2008 2009
HEADLINE PRIME YIELDS
Poland is the only European country to avoid recession in
2009 and recorded the strongest GDP growth in the EU in
2010, at an estimated 3.8%. A healthy performance is expected
for 2011 albeit at a slightly lower level.
On the back of these strong macroeconomic foundations the
Polish real estate market is one of the most healthy in Europe
reflected in an increase of over 180% in activity compared to
2009 and 2011 is likely to repeat these strong results. Despite
an improving debt market with capital largely available for
prime investments, banks continue to approach lending to
secondary product and development projects conservatively.
This has resulted in a compression of around 50bp in prime
yields in 2010 and a further moderate compression is likely
this year. International core and core plus investors will
dominate the buy side while the supply of stock continues to
be from developers keen to unlock equity and launch new
projects as well as funds approaching their exits.
The occupational market is rebounding after slowing in 2009
with the retail sector leading the way out of the downturn. In
the office sector, despite evident improvements, the majority
of deals are still concluded in Warsaw with international
occupiers wary of the more fragile regional markets. Activity
in the industrial market is picking up but the challenges of
oversupply in secondary areas remain.
POLAND INTERNATIONAL INVESTMENT ATLAS 2011
IT ITAL ALYY
Population 38.0 mn
Top Cities
Warsaw 1.7 mn
Kraków 755,000
Lódz 745,000
Wroclaw 632,000
Poznan 556,000
2010 estimate
GDP US$475 bn
GDP per Cap US$18,780
GDP Growth 3.8%
CPI Inflation (average) 2.6%
10 yr Bonds (yr end) 6.1%
Unemployment (average) 12.0%
Politics
Coalition of the centre-right Civic
Platform and the agrarian Polish
People’s Party. Next parliamentary
elections to be held in late 2011.
KEY DRAWBACKS
I Modest political risk with
national elections taking place
in the autumn
I Domestic capital markets
underdeveloped
I Weakness in second tier markets
Stamp duty of 1.00% is payable if a
company (SPV) is acquired, 2.00% is
payable if a property is acquired
directly.
Transfer Tax 1.00% - 2.00%
Notary Min €25, max €3,650
Legal 0.50%
Agency 1.00% - 1.50%
Other VAT can be claimed back
KEYATTRACTIONS
I One of the fastest developing
economies in Europe
I Large domestic market
I Large market liquidity with good
availability of prime stock
I Healthy finance sector to
facilitate leveraged acquisitions
TRADING COSTS
THE COUNTRY
44
CZECH
GERMANY
SLOVAKIA
UKRAINE
RUSSIA
BELARUS
2009 InvestmentVol. €698 mn
2010InvestmentVol. €1,957 mn
Change from2009 180.3%
Interest Rate (Dec 10) 5.00%
Currency (Dec 10) US$1 = PLN 2.95
€1 = PLN 3.96
Rent Measurement €/sq.m/mth
PROPERTY MARKET
5.00%
4.00%
6.00%
7.00%
8.00%
9.00%
2006 2007 2010 2008 2009
Industrial Shopping Centres Offices
HEADLINE PRIME YIELDS
Cushman &
Wakefield
represented
Atrium Real
Estate in the
purchase of the
Promenada
Shopping Centre
inWarsaw,
purchased for
€169.5 mn
The Brazilian economy was one of the first to recover from the
global financial crisis and continued to expand rapidly in
2010. GDP grew by an estimated 7.5% over the year on the
back of stimulus measures, export recovery, and improved
credit availability. Salaries and employment levels have
continued to rise, translating into strong consumer confidence
and a growing middle class.
Brazil’s healthy economic performance brought about an
increase in investment activity in 2010 with transaction
volumes reaching €4.6 billion. As a result of strong investor
demand and rising asset values associated with the anticipated
reduction in long term interest rates, yields fell sharply and
currently stand at record lows of 8.50%-11.00% and are
expected to remain stable in 2011.
There is a considerable under-supply of high quality, modern
stock and occupier demand remains strong; rents are rising
although expected to peak in the near future with an increase
of high-quality office space expected in 2011-2013 following
the completion of a number of Class A developments.
Ongoing improvements in infrastructure are likely to create
new investment opportunities in the industrial and logistics
sectors nationwide. In the medium term, the run-up to the
football World Cup in 2014 and the Olympic Games in 2016
looks set to create opportunities in the real estate market,
particularly in the hospitality and tourism sectors.
BRAZIL INTERNATIONAL INVESTMENT ATLAS 2011
Population 190.7 mn
Top Cities
São Paulo MetropolitanArea 19.6 mn
Rio de Janeiro
Metropolitan Area 11.6 mn
Belo Horizonte
Metropolitan Area 5.4 mn
Porto Alegre
Metropolitan Area 3.9 mn
2010 estimate
GDP US$1,985 bn
GDP per Cap US$11,250
GDP Growth 7.5%
CPI Inflation (average) 5.9%
10 yr Bonds (yr end) 5.0%
Unemployment (average) 5.7%
Politics
Dilma Rousseff of the Partido dos
Trabalhadores (PT) won the
October 2010 presidential run-off
election and took office on 1st
January 2011.
KEY DRAWBACKS
I High cost of assets
(particularly offices)
I Uncertainty about the strategies
of the new presidential
administration
I Exchange rate issues
(local currency overvalued)
I High interest rates
Total transaction costs average
6.25% - 7.00%
Transfer Tax 2.00%
Notary 0.25% - 0.50%
Legal 1.00% - 1.50%
Agency 3.00%
Other n/a
KEYATTRACTIONS
I High returns
I Growing investment interest
across residential, hospitality and
commercial property
I Strong economic growth and
emerging middle class
I Possibility of development
funding up to 80%
ASUNCIÓN
BRASÍLIA
Manaus
Boa Vista
Belo Horizonte
Goiânia
Cuiabá
Porto Velho
Vitória
Rio de Janeiro São Paulo
Salvador
Belém São Luis
Teresina Fortaleza
João Pessoa
Aracaju
Recife
Maceió
Natal
Porto Alegre
Florianópolis
Curitiba
Rivera
Pedro Juan Caballero
Ciudad del Este
Palmas
Anápolis
Campinas
Nova Igaçu
Posadas
Santos
Campo Grande
Rio Branco
Santarém
Macapá
São Carlos
Governador Valadares
Itabuna
Mossoró Imperatriz
Juàzeiro
Vitória da Conquista
Caxias do Sul
Rio Grande
Rondonópolis
G
U
YA
N
A
VENEZUELA
COLOMBIA
BOLIVIA
BRAZIL
ARGENTINA
URUGUAY
SURINAME
PARAGUAY
PERU
TRADING COSTS
THE COUNTRY
19
2009 InvestmentVol. €1,250 mn
2010InvestmentVol. €4,583 mn
Change from2009 266.6%
Interest Rate (Dec 10) 10.67%
Currency (Dec 10) US$1 =BRL 1.66
€1 =BRL 2.23
Rent Measurement R$/sq.m/mth
PROPERTY MARKET
Sale of the Castelo Branco Office Park, Alphaville, Sao Paulo State
9.00%
Industrial Shopping Centres Offices
7.00%
10.00%
12.00%
14.00%
2006 2007 2010 2008 2009
8.00%
11.00%
13.00%
15.00%
16.00%
HEADLINE PRIME YIELDS
China’s GDP expanded by 10.3%in 2010 fuelled by strong
export performance and rising investment, government
spending and consumer demand. Inflation, largely caused
by excessive credit expansion, is a major concern and the
government is likely to tighten monetary policy in the coming
year. Further economic growth is predicted for 2011, although
the rate of expansion is expected to slow.
Investment activity was up by a third on 2009 volumes with
domestic institutional investors dominating the market,
although foreign activity is rising, supported by firmer
occupational fundamentals. Prime yields hardened across all
commercial property sectors to end the year at 5.00% for
offices, 7.00% for retail and 8.50% for industrial product.
Yields are expected to remain stable in 2011, although rents
are expected to increase.
With the tightening of lending to residential investors and
developers, the focus of activity is shifting away from this
sector to office and retail projects. Demand for retail projects is
expected to be particularly strong with Tier 2 and Tier 3 cities
offering the highest growth opportunities. Overall the market
is expected to remain healthy in 2011, however, government
measures to curb inflation and rein in soaring property prices
are likely to reduce the availability of credit. There are also
fears that further growth in property prices is unsustainable
and that a price correction is possible in the medium term.
CHINA INTERNATIONAL INVESTMENT ATLAS 2011
Population 1,335 mn
Top Cities
Chongqing 28.6 mn
Shanghai 19.2 mn
Beijing 17.6 mn
Chengdu 11.4 mn
Harbin 9.9 mn
2010 estimate
GDP US$5,631 bn
GDP per Cap US$7,800
GDP Growth 10.3%
CPI Inflation (average) 3.3%
10 yr Bonds (yr end) 3.9%
Unemployment (average) 4.1%
Politics
One party rule by Chinese
Communist Party, led by Hu Jintao.
KEY DRAWBACKS
I Increased government regulation
I Strong competition from
domestic players
I Lower yields
I Lower credit available for
residential projects
I Lack of market transparency;
complex tax structure
Total acquisition fees are typically
around 5.00% (including stamp duty,
deed tax and agency fees).
Stamp Duty 0.05%
Transfer Tax 3.00%
Notary 0.05%+
Legal 0.15%+
Agency Case by case basis but
typically 1.00% - 3.00%
Other Financial consultant fees
(0.15%+), valuation fees (0.05%+),
technical due diligence (0.05%+)
and other associated
miscellaneous fees
KEYATTRACTIONS
I Strong underlying economic
growth
I Rising disposable incomes
I Ongoing urbanization and
improvement in infrastructure
I Demand for residential, retail
and office projects still strong
TRADING COSTS
THE COUNTRY
22
BEIJING (PEKING)
Chengdu
Canton Shenzhen
Shanghai
Nanjing
Wuhan
Xi'an
Taiyuan
Tientsin
Zibo Jinan
Shenyang
Dalian
Harbin
Zhaotong Panzhihua
Neijiang
Mianyang
Fuzhou
Shantou
MeizhouXiamen Shaoguan Liuzhou
Guiyang Hengyang Changsha
Changde Nanchang
Jingdezhen
Wenzhou
Ningbo Hangzhou
Hefei
Huainan
Chongqing
Suizhou
Zhengzhou Xianyang Lanzhou Luoyang
Xuzhou
Shijiazhuang
Zhangjiakou Datong
Baoding
Tangshan
Dongying Yantai
Qingdao
Yinchuan
Fuxin
Anshan
Changchun Jilin
Yanji
Qiqihar Daqing
Mudanjiang
Fuyuan
Yumen
Xining
Kunming
Qujing
Tianjin
R
I N N E R M O N G O
L I A

TI BE T
SINKIANG
CAMBODIA
LAOS
PHILIPPINES
THAILAND
MYANMAR
(BURMA)
A
CHINA
MONGOLIA
BHUTAN NEPAL
BANGLADESH
VIETNAM
NORTH KOREA
TAIWAN
JAPAN
SOUTH KOREA
INDIA
2009 InvestmentVol. €112,666 mn
2010InvestmentVol. €148,478 mn
Change from2009 31.8%
Interest Rate (Dec 10) 5.31%
Currency (Dec 10) US$1=RMB 6.83
€1=RMB 9.78
Rent Measurement RMB/sq.m/mth
PROPERTY MARKET
4.00%
Industrial Shops Offices
3.00%
5.00%
6.00%
7.00%
8.00%
2006 2007 2010 2008 2009
9.00%
10.00%
HEADLINE PRIME YIELDS
Sale of
International
Capital Plaza on
the North Bund
area (1318 Sichuan
Road North) in
Shanghai. A 30-
storey office and
retail complex
with the total GFA
of 56,278 sq.m
Sample Country Profiles:
To purchase the full report priced at €800 you can request a printed copy from
www.cushmanwakefield.com/knowledge
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Peru
Poland
Portugal
Republic of Korea
Romania
Russia
Serbia
Singapore
Slovakia
Slovenia
South Africa
Spain
Sweden
Switzerland
Turkey
Ukraine
United Arab Emirates
United Kingdom
USA
Vietnam
GLOBAL YIELDS INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
14
Country Offices Shops Industrial Trend
Argentina 10.00% 9.00% 12.00%
Australia 6.25% 5.50% 7.75%
Austria 5.50% 4.70% 7.50%
Bahrain 10.00% 11.00% 11.00%
Belgium 6.20% 5.00% 7.75%
Brazil 8.50% 8.50*% 11.00%
Bulgaria 10.00% 9.00% 13.00%
Canada 7.00% 6.75% 7.75%
Channel Islands 6.50% 5.50% 7.50%
Chile 8.50% 8.50% 9.50%
China 5.00% 7.00% 8.50%
Colombia 9.75% 10.00*% 10.90%
Croatia 8.00% 7.75% 9.50%
Czech Republic 6.50% 6.25%* 8.25%
Denmark 5.00% 4.50% 7.25%
Ecuador 11.60% 15.30% 11.70%
Egypt 9.25% 10.25% 10.25%
Estonia 9.00% 8.50% 10.50%
Finland 5.75% 5.25% 7.25%
France 4.75% 4.75% 7.00%
Germany 4.95% 4.10% 6.60%
Greece 8.10% 7.35% 9.90%
Hong Kong 3.40% 3.90% 5.30%
Hungary 7.25% 7.25%* 9.00%
India 10.00% 13.50% 12.00%
Indonesia 10.00% 10.00% 12.00%
Ireland 7.50% 6.25% 8.50%
Israel 7.50% 7.00% 8.50%
Italy 5.25% 6.25%* 8.00%
Japan 4.50% 4.70% 6.30%
Latvia 9.00% 8.50% 10.75%
Country Offices Shops Industrial Trend
Lithuania 8.00% 8.00% 10.75%
Luxembourg 5.90% 5.75% -
Malaysia 6.00% 6.00% 8.00%
Mexico 11.75% 12.25% 11.50%
Netherlands 6.05% 4.70% 7.70%
New Zealand 8.00% 7.00% 7.50%
Norway 5.75% 5.75% 6.75%
Peru 15.00% 16.00% 18.00%
Philippines 9.50% 3.20% 4.30%
Poland 6.50% 6.50%* 8.50%
Portugal 7.00% 6.25% 8.50%
Republic of Korea 6.50% 7.50% -
Romania 9.00% 9.00*% 9.50%
Russia 9.00% 10.00%* 11.00%
Saudia Arabia 9.50% 11.00% 11.00%
Serbia 10.50% 10.50% 13.00%
Singapore 3.90% 5.50% 6.70%
Slovakia 7.25% 7.25%* 8.75%
Slovenia 7.75% 7.00% 9.25%
South Africa 9.00% 7.75%* 11.00%
Spain 5.75% 4.75% 7.75%
Sweden 5.00% 5.00% 7.00%
Switzerland 4.50% 4.50% 6.75%
Taiwan 2.50% 2.00% 3.00%
Thailand 7.00% 8.00% 8.50%
Turkey 8.15% 7.50% 9.15%
Ukraine 16.00% 17.00% 17.00%
United Arab Emirates 9.50% 12.50% 12.25%
United Kingdom 4.00% 3.00% 6.00%
USA 6.20% 7.70% 7.80%
Vietnam 12.00% 11.00% 12.00%
*Shopping Centres. Note: Yields marked in red are calculated on a net basis to include transfer costs, tax and legal fees. Source: Cushman & Wakefield December 2010
GLOBAL INVESTMENT VOLUMES
15
€Millions (Above US$5 million equivalent, excludes apartments) €Millions (Above US$5 million equivalent, excludes apartments)
€
Country 2009 2010 Annual Change Trend
Argentina 144 235 63.9%
Australia 7,218 10,541 46.0%
Austria 1,252 1,111 -11.2%
Bahrain 0 0 n/a
Belgium 1,685 1,587 -5.8%
Brazil 1,250 4,583 266.7%
Bulgaria 89 19 -78.9%
Canada 4,668 11,575 148.0%
Channel Islands 93 82 -11.9%
Chile 1,393 403 -71.1%
China 112,666 148,478 31.8%
Colombia 73 72 -1.1%
Croatia 81 137 69.1%
Czech Republic 402 490 22.0%
Denmark 1,654 2,578 55.9%
Ecuador 0 0 n/a
Egypt n/a 204 n/a
Estonia 23 35 49.6%
Finland 1,306 2,102 61.0%
France 7,857 11,085 41.1%
Germany 10,415 19,510 87.3%
Greece 277 158 -42.9%
Hong Kong 7,128 15,804 121.7%
Hungary 474 241 -49.2%
India 1,798 3,219 79.1%
Indonesia 6 0 n/a
Ireland 135 240 77.7%
Israel 1,320 1,100 -16.7%
Italy 3,776 3,789 0.3%
Japan 15,366 17,221 12.1%
Latvia 0 0 n/a
€
Country 2009 2010 Annual Change Trend
Lithuania 0 0 n/a
Luxembourg 506 345 -31.8%
Malaysia 1,024 2,997 192.7%
Mexico 310 207 -33.1%
Netherlands 3,510 5,151 46.7%
New Zealand 2,004 2,303 14.9%
Norway 1,455 4,125 183.6%
Peru 71 179 153.3%
Philippines 339 24 -93.0%
Poland 698 1,957 180.3%
Portugal 593 705 18.8%
Republic of Korea 7,786 4,518 -42.0%
Romania 129 240 85.6%
Russia 1,657 2,803 69.2%
Saudia Arabia 505 57 -88.6%
Serbia 311 106 -65.8%
Singapore 2,142 10,027 368.2%
Slovakia 26 61 135.4%
Slovenia 11 0 n/a
South Africa 1,554 815 -47.5%
Spain 3,413 3,614 5.9%
Sweden 2,481 9,230 272.0%
Switzerland 476 570 19.7%
Taiwan 3,934 5,711 45.2%
Thailand 305 620 103.0%
Turkey 543 1,381 154.3%
Ukraine 323 451 39.6%
United Arab Emirates 1,849 1,125 -39.1%
United Kingdom 28,885 42,813 48.2%
USA 29,400 71,268 142.4%
Vietnam 183 166 -9.0%
Source: Cushman & Wakefield, Property Data, KTI and RCA
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
16
US$ Millions (Above US$5 million, excludes apartments) US$ Millions (Above US$5 million, excludes apartments)
Country 2009 2010 Annual Change Trend
Argentina 202 307 51.5%
Australia 10,264 13,997 36.4%
Austria 1,796 1,491 -17.0%
Bahrain 0 0 n/a
Belgium 2,418 2,129 -11.9%
Brazil 1,770 6,072 243.0%
Bulgaria 128 25 -80.3%
Canada 6,609 15,284 131.3%
Channel Islands 133 110 -17.7%
Chile 1,929 519 -73.1%
China 161,486 198,002 22.6%
Colombia 106 96 -9.4%
Croatia 116 184 58.1%
Czech Republic 577 658 14.1%
Denmark 2,373 3,458 45.7%
Ecuador 0 0 n/a
Egypt n/a 250 n/a
Estonia 34 47 39.8%
Finland 1,874 2,820 50.5%
France 11,273 14,871 31.9%
Germany 14,943 26,174 75.2%
Greece 398 212 -46.6%
Hong Kong 10,150 20,686 103.8%
Hungary 681 323 -52.5%
India 2,522 4,309 70.9%
Indonesia 7 0 n/a
Ireland 193 322 66.2%
Israel 2,263 1,024 -54.8%
Italy 5,418 5,083 -6.2%
Japan 21,033 23,020 9.4%
Latvia 0 0 n/a
Country 2009 2010 Annual Change Trend
Lithuania 0 0 n/a
Luxembourg 726 463 -36.2%
Malaysia 1,419 3,801 167.9%
Mexico 443 269 -39.3%
Netherlands 5,036 6,910 37.2%
New Zealand 2,875 3,090 7.5%
Norway 2,087 5,534 165.2%
Peru 103 243 136.4%
Philippines 493 30 -94.0%
Poland 1,002 2,626 162.1%
Portugal 851 946 11.1%
Republic of Korea 10,966 5,915 -46.1%
Romania 186 322 73.6%
Russia 2,377 3,761 58.2%
Saudia Arabia 713 80 -88.8%
Serbia 446 142 -68.0%
Singapore 2,142 10,027 368.2%
Slovakia 37 81 120.1%
Slovenia 16 0 n/a
South Africa 2,229 1,094 -50.9%
Spain 4,897 4,848 -1.0%
Sweden 3,560 12,383 247.8%
Switzerland 683 764 12.0%
Taiwan 5,551 7,475 34.7%
Thailand 437 805 84.3%
Turkey 779 1,853 137.8%
Ukraine 463 606 30.7%
United Arab Emirates 2,491 1,515 -39.2%
United Kingdom 41,444 57,436 38.6%
USA 41,427 93,779 126.4%
Vietnam 261 214 -17.9%
Source: Cushman & Wakefield, Property Data, KTI and RCA
STANDARD GLOBAL LEASE TERMS
17
The following is a summary of typical lease structures for commercial property. It should be noted that in many instances, certain aspects of lease terms will be open to negotiation and these therefore represent only the standard
terms currently being seen across different sectors of the market.
Summary of Standard Global Lease Terms
Country Length - years Tenant Breaks Security of Tenure/Right to renew Indexation or Review
Off/Ind Retail
Argentina 3-5 5-10 Yes, after 6 months None By negotiation, no standard
Australia 5-10 5 Only by negotiation None other than by negotiation Annual increment to open market value or agreed fixed increase
Austria 5-10 / 3-5 5-10 None other than by negotiation No automatic right to renew Indexed to a government issued monthly index.Adjustment most often on a yearly basis
Bahrain 3 3 & 5 Break possible if included in the lease Not automatic No fixed indexation. Rents are reviewed by negotiation to a market rent when either a notice to
terminate has been served or a new lease signed
Belgium 9 9+ 3 yearly Retail only – normally the right to renew Annual indexation to the “Health Index” (an adjusted consumer price index)
for a further three terms of 9 years
Brazil 3-5 3-5 By negotiation Yes on leases over 5 years Annual inflation adjustment plus 3 yearly review
Bulgaria 5/3-5 5+ Break options after the third year None other than by negotiation Rents are indexed to HCPI or the Eurozone CPI index
with 6 months notice
Canada 5-10 5-10 Negotiable.Typically at end of year 5 Usually the right to renew for an additional Right to renew typically at market rates. Sometimes a renewal may specify at a rate not to
or 7 with a financial penalty 5 years. Retail usually has two 5 year options exceed a set dollar amount
Channel Islands 9-15 9-15 None except in the case of 21 or 24 year No security of tenure in Jersey or Guernsey Index linked 3 yearly rent reviews. Prime stock linked to market rental value and secondary
leases with a tenant break at 15 and renewal is by negotiation stock to the cost of living
Chile 3-5 3-5 Only by negotiation. Normally the tenant Tenant has the right to automatically renew the Indexation to CPI
pays for any unexpired portion of the lease lease term for the same period as the original
lease term
China 3-6 3-10 Rare but negotiable None other than by negotiation Not typical. New lease usually negotiated prior to lease end
Colombia 3 5 By negotiation but usually with a penalty of Yes on leases over 5 years Annual indexation to IPC
6 months equivalent rent
Croatia Offices: 5+5 years for Offices: break after year 3 is possible Right to renew after the first 5 years Annual indexation to Eurozone CPI
5 years, or high street
recently more shops and
common 3+2 shopping
centres (some
shopping
centres
continue to
insist on 10
year leases)
Czech Rep 3-5 / 3-5-10 3-5 Negotiable None other than by negotiation Annual indexation to the relevant inflation index: Eurozone or EU 27 HICP for Euro-denominated
leases or Czech Statistical Office CPI for CZK leases
Denmark 3-5 3-5 Negotiable Yes. As a general rule leases are constantly rolling Annual CPI indexation or to a fixed percentage
until notice is served
Ecuador 3-5 3-5 Market practice is if the tenant breaks that Defined as a clause in every contract, usually Contracts indexed to local consumer price index (INEC)
the landlord retains the 2 month guarantee tenant uses this right to renew
Egypt 3-5 3-5 None other than by negotiation No security of tenure and renewal only Annually at a percentage normally defined in the lease but typically between 3% - 8%
by negotiation
Estonia 3-5 / 3-10 5-10 None, only for leases of an unspecified term, Not automatic by law, but a common practice Rents are typically tied to the Euro but indexed to local inflation
where at least 3 month’s notice is required on the market
Finland 1-5 / 7-12 1-5 None Negotiable, options to renew increasing Indexed annually or biannually to the cost of living (FIN elinkustannusindeksi)
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
18
Summary of Standard Global Lease Terms
Country Length - years Tenant Breaks Security of Tenure/Right to renew Indexation or Review
Off/Ind Retail
France 9 10-12 3 yearly Right to renew for an extra term Rents are indexed to the INSEE cost of construction index. New retail leases for shopping centres
and retail parks are increasingly linked to the ILC (Indice des Loyers Commerciaux)
Germany 5-10 / 3-10 5-10 Negotiable. None for retail or only with Right to renew for an extra term. For retail only if Rents are indexed to the official consumer price index (“Verbraucherpreisindex”) –
payment of penalty options to extend (e.g. 5+5) were agreed in the an automatic adjustment on a given date or whenever the changes occur
contract
Greece 12 12 After the first year with 3 months notice Right to extend for a further 3 years Annual indexation to consumer price index plus extra margin (usually +1 percentage point)
and payment of 1 month’s penalty
Hong Kong 2, 3 or 6 years 2-3 None other than by negotiation None other than by negotiation. By negotiation but usually at lease renewal or 3 yearly on longer leases
Options for renewal are typical however
Hungary 5-7 / 3-5 5-10 After the third year against a penalty fee of None other than by negotiation, although tenant Annual indexation to HICP. Alternatively, office rents may be indexed to Eurostat’s MUICP
the annual rent + service charges only extension options common in the retail sector
India 3+3 3+3 Negotiable, typically with a 3 to 6 month None other than by negotiation, with an option for Fixed rental increase of 15-18% every 3 years
(varies by period renewal typical
notice region)
Indonesia 3 / 1-2 5 By negotiation and subject to landlord Negotiable.Tenants do not have the automatic No indexation. Review usually after 3 years.
approval. In most instances the tenant is right to renew
granted the right to sublease the property
or are required to pay the rent for the
remainder of the lease
Ireland Up to 10 15 Break option after the fifth year After 5 years, up to 20 year additional term. 5 yearly to market rental value.
(office and industrial only) Tenants can contract out of these rights once legal Generally upwards only, however new legislation from Feb 2010 prohibited upwards only clause
advice has been obtained in all new commercial leases
Israel 10 / 25 10 5 + 5 + 5 Term before the end of the option period the Indexation to CPI at each rent payment, typically quarterly
tenant needs to renew: 3 - 6 months (Offices) /
6 - 12 months (Industrial)
Italy Property lease: 1) Property The 6 + 6 year regime (contemplated 1) Property lease: tenants have the right to Annual indexation to ISTAT (cost of living index)
most typical lease: by the Civil Code) enables the tenant to extend for another term and for retail receive 1) Property lease: 75% of ISTAT or 100% if the lease is longer than 6 years
6 + 6 yrs (but see comment restrict the term to 6 years, or automatically compensation if terminated 2) Business lease: 100% of ISTAT
it may also Off/Ind. extend the term for the second period. 2) Business lease: tenants do not have any
be for other 2) Business Break clauses can be included within statutory right to renewal, or compensation if
prescribed lease: usually the lease structure by negotiation the landlord decides not to renew the contract
combinations for 5 to 7
e.g. for 9 + 6 years
years, or for
9 + 9 years,
or for a longer
fixed period)
Japan 2 5-10 Standard termination provision with 6 months Indefinite for Standard lease structures. Review to market upon mutual discussion is most common
advance written notice for Standard lease None under fixed-term lease structure
structures. No early termination rights for
fixed-term lease structures
Latvia 1-5 / 1-5 1-5 None, only for leases of an unspecified term No automatic right to renew but is common Rents are indexed to either local inflation or Euro CPI, or capped at a pre-agreed fixed rate
where at least 3-6 months notice is required practice in the market
but with a minimal term of 1 year
STANDARD GLOBAL LEASE TERMS
19
Summary of Standard Global Lease Terms
Country Length - years Tenant Breaks Security of Tenure/Right to renew Indexation or Review
Off/Ind Retail
Lithuania 1-3 / 1-3 1-3 None, unless the ownership changes Yes, for another term Rents are indexed to local inflation or more rarely to Euro CPI, or capped at fixed rates
(varied by sector)
Luxembourg 3-6-9 9-12 Rare but negotiable. At the earliest after No automatic right to renew Annual indexation to CPI, triggered by a set increase in the index
3 years
Malaysia 3+3/3 3 Break options are not commonplace. A notice Typically an option to renew for a period of Rents are not indexed although upon lease renewal are typically reviewed to market rents
of 3-6 months must be served by the tenant 2-3 years is allowed, usually for one term only whereby the tenant pays a proportionate share of any increases
or landlord in order to terminate the lease
Mexico 3-5 5-10 Negotiable. Normally yes but subject to None other than by negotiation Annual increases to US CPI. However, contracts are showing a new tendency to be negotiated in
penalties Mexican pesos
Netherlands 5-10 5-10 For all sectors negotiable Retail: The tenant has security of tenure as the Annual indexation to CPI
lease automatically renews at expiry, bearing in
mind the notice period.The exception to this is
if the landlord wishes to occupy, tear down or
redevelop the building.These conditions are
rather strict and in reality the landlord’s options
of terminating the lease are limited.
Office and industrial: Negotiable
New Zealand 9-12 3-6 Rarely but can be negotiated Right to renew negotiable and common in Usually 3 years review to market rent (upwards only). In addition rents are adjusted annually through
commercial and larger industrial leases a ‘ratchet’ clause based on a fixed increase or CPI related increase
Norway 3-10 / 5-15 3-10 Negotiable Statutory right to renew Annual indexation to CPI
Peru 3-5 3-5 By negotiation By negotiation Annual inflation adjustment to US CPI
Philippines 3-5 3-5 Break clauses must be stipulated in the lease. The current tenant is normally granted the right Leases are not indexed.Any escalations to the rent must be specifically stipulated in the contract
In the absence of an agreed break clause the to renew.Tenants are required to, 90-days prior to
tenant will be required to pay a penalty which lease expiry, submit a letter expressing interest
is usually equivalent to the remaining in renewing the lease
proportion of the lease
Poland 3-5 5-10 Short leases with extensions popular No automatic right to renew Annual indexation to Eurozone CPI or less frequently a fixed increase of 2% - 3%
Portugal 5 6 Negotiable under the new lease law Negotiable under the new lease law Annual indexation to CPI
Rep of Korea 3+2 2+2 Negotiable Negotiable Annual review to market value
Romania 3-5 3-5 No break options Negotiable Annual indexation to CPI
Russia 3-5 / 1-3 1-3 Negotiable after 3 years Yes if stated in the lease Annual indexation to USA/EU CPI or fixed increase (variable by sector)
Saudi Arabia 3 3 Breaks are possible Yes, but not automatic, must be mutual Review to market after 3-5 years
Serbia 3-5 3-5 Subject to negotiation No automatic right to renew Annually to CPI
Singapore 2-3 2-3 Only by negotiation but not common. None other than by negotiation By negotiation, typically at lease end to open market rental value
Tenant has to seek replacement for
remaining lease
Slovakia 3-5-10 5-10 Only by negotiation Negotiable Annually indexed to Eurozone or EU 27 HICP
Slovenia 5 (but a 5 By negotiation and typically the current No automatic right to renew. Only by negotiation Not all leases are indexed. For those that are indexation varies but is typically either Slovenian CPI
tendency to tenant needs to find a replacement or Austrian CPI
2-3 yrs
preferred
by tenant.
Older leases
tend to be
indefinite)
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
20
Summary of Standard Global Lease Terms
Country Length - years Tenant Breaks Security of Tenure/Right to renew Indexation or Review
Off/Ind Retail
South Africa 3-5 3-5 None other than by negotiation Lease renewal negotiations are held 3-6 months Reviews at lease expiration, typically to market value
before lease expiration
Spain 3-5 / 5+ 5+ Negotiable after 5 years for longer leases Negotiable, usually none Annual indexation to IPC (or IPC+1 if the rent is low)
(10-20
for HS)
Sweden 3-5 3-5 None for short leases, negotiable on a Automatic right to renew for another term Indexed annually to the consumer price index (CPI)
lease of 5+ years
Switzerland 5 5 Negotiable Yes if stated in the lease Annual indexation to Swiss CPI is typical
Taiwan 3-5 3-5 Negotiable. Usually tenants can exercise the No statutory right to renew Rent increases run between 2% - 3% or at the CPI equivalent starting from the 3rd year of
break option after the first or second year leasing term
but are subject to a penalty (equivalent to
one to three months rent)
Thailand 3 3 Not normally allowed, unless tenant is going Upon negotiation Upon negotiation approximately and typically between 2% - 3% or at the CPI of the existing gross rent
to bankrupt
Turkey 3-5 5 Yes None except by negotiation Annual indexation to currency CPI or fixed step rents through the lease term
Ukraine 3 3 Yes, but clause should be included in lease Yes if stated in the lease By negotiation
United Arab 3-5 1-3 None Statutory right to renew
Emirates
United 5-15 5-15 Negotiable, after the first rent review at Statutory right to renew 5 yearly to open market value (upward only)
Kingdom the earliest
USA 5-10 10 Negotiable None other than by negotiation Fixed increments at 3 and 5 years or annual indexation to CPI
Vietnam 3 3 Negotiable No Typically at lease end to open market rental value
Length: Typical contracted lease length (term) in years.
Tenant Breaks: Tenant only options to break this lease within the contractual lease term.
Security of Tenure: A right by statute or contract for the tenant to remain in occupation after the end of the contracted lease term.
Indexation or Review: Stated terms under which the rent payable under the lease will be increased during the lease term. Indexation is typically an annual increase in line with inflation or some
associated measure. A review, typically, will be to the open market rent then achievable for a new letting.
Source: Cushman & Wakefield
Abu Dhabi announced a 5% rent cap in 2009. Dubai’s newly introduced rent laws and rental index,
prohibits an increase in rents for new leases signed in 2008. However, for more historic leases, if
the 2008 rent is more than 25% below the rental index, then the landlord can impose an increase.
The above will be overridden if a fixed rent is stated in the lease
21
Cushman & Wakefield is the exclusive leasing agent for One World Trade Center.
One World Trade Center will be New York’s premier office tower, offering an
exceptionally well positioned and appointed facility with unsurpassed convenience,
security and safety. Among the world’s most green construction projects,
the building provides an unprecedented range of leasing opportunities.
One World Trade Center
22
RESEARCH SERVICES INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
The Report
This report has been prepared based on data collected through our own research as well as information available to us
from public and other external sources. The deals data used relates to non-confidential reported market transactions,
excluding residential, indirect investment and future commitments. In respect of all external information, the sources
are believed to be reliable and have been used in good faith. However, Cushman & Wakefield cannot accept
responsibility for their accuracy and completeness, nor for any undisclosed matters that would affect the conclusions
we have drawn. Certain of the assumptions and definitions used in this research work are given within the body of the
text. Information on any other matters can be obtained from the European Research Group of Cushman & Wakefield.
Our Research Services
The Research Group provides a strategic advisory and supporting role to our clients. Consultancy projects are
undertaken on a local and international basis, providing in-depth advice and analysis, detailed market appraisals and
location and investment strategies. Typical projects include:
• Reliable and comparable data and market intelligence
• Site specific, location analysis, ranking and targeting for occupation or investment
• Analysis of future development activity and existing supply/competition
• Market research and demand analysis by retail/industry sector
• Rental analysis, forecasts & investment and portfolio strategy
For further information contact:
This report has been prepared by Cushman & Wakefield and its
alliance partners globally. The information was collected and
edited by the European Research Group from the Cushman &
Wakefield network, with particular thanks to the following offices:
Austria Inter-Pool/FaciCon
Bulgaria Forton International
Channel Islands Buckley & Co Ltd
Chile Contempora Servicios Imobiliários
Colombia Fonnegra Gerlein
Denmark RED – Property Advisers
Greece Proprius
Ireland Lisney
Israel Inter Israel Real Estate Agency Ltd
Luxembourg Property Partners SA
New Zealand Bayleys Realty Group Limited
Norway Malling & Co
Peru Contempora Servicios Imobiliários
Serbia Forton International
South Africa Pace Property Group (PTY) Ltd
Switzerland SPG Intercity
For industry–leading intelligence to support your real estate and
business decisions, go to the Cushman & Wakefield Knowledge
Center at cushmanwakefield.com/knowledge
David Hutchings
Head of the European Research Group
[email protected]
Tel: +44 (0) 20 7152 5029
Joanna Tano
Associate – European Research Group
[email protected]
Tel: +44 (0) 20 7152 5944
Sources
Marco economic data
Oxford Economics, Economist Intelligence Unit and Consensus Economics.
Transactional data
Alongside Cushman & Wakefield information, data has been used from
Property Data, KTI and Real Capital Analytics.
23
CAPITAL MARKETS CONTACTS
Capital Markets provides advisory and execution and investment management services to clients engaged in
buying, selling, investing in, financing or building real estate. These services typically are provided to private and
institutional owners and investors, as well as to corporate owners and occupiers.
Our objective is to advise clients on how to maximise the value of their real estate. We assist them in extracting that
value through the application of sophisticated financial strategies and funding mechanisms. Our efforts include but
are not limited to investment sales and purchases, loan sales, joint ventures, sale-leasebacks, traditional mortgages,
private placements, securities underwriting, mezzanine financing, loan syndication and other financing vehicles.
For further information on our services contact:
Global
Greg Vorwaller
Executive Vice President
Global Head of Capital Markets
[email protected]
Tel: +(1)312 470 1855
EMEA
Michael Rhydderch
Head of Capital Markets EMEA
[email protected]
Tel: +44 20 7152 5060
Asia Pacific
John Stinson
Head of Capital Markets Group, Asia Pacific
[email protected]
Tel: +(65) 6232 0878
The Americas
Janice Stanton
Senior Managing Director, Capital Markets Group
[email protected]
Tel: +1 (212) 841 5025
or visit – www.cushmanwakefield.com
24
INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
The Americas
ARGENTINA
+54 11 5555 1111
Herman Faigenbaum
[email protected]
Carlos Pellegrini 1143 6° piso
(C1009ABX)
Buenos Aires
Argentina
BRAZIL
+55 11 5501 5464
Mordejai Goldenberg
[email protected]
Edificio Berrini 500
Praça Prof. José Lannes 40 – 3rd Floor
04571-100 Sao Paulo
Brazil
CANADA
+1 416-862-0611
Jamie Ziegel
[email protected]
33 Yonge Street, Suite 1000
Toronto, Ontario MSE 1S9
Canada
CHILE
+ 55 11 5501 5463
Maclean Oliveira
[email protected]
Praça Professor José Lannes, 40 - 3º andar
04571-100 - São Paulo, SP
Brasil
MEXICO
+(52 55) 8525 8027
Ander Legorreta
[email protected]
Paseo de los Tamarindos 60-B Piso 2
Col. Bosques de las Lomas
México, D.F. 05120
UNITED STATES
New York
+1 (212) 841 7887
Frank Liantonio
Executive Vice President,
Capital Markets Group
[email protected]
+1 (212) 841 9216
Steven Kohn
President of Cushman & Wakefield
Sonnenblick Goldman
[email protected]
+1 (212) 841 7616
Michael Rotchford
Executive Vice President,
Investment Banking
[email protected]
1290 Avenue of the Americas
New York
NY 10104-6178
USA
San Diego
+1 (858) 334 4001
Stath Karras
Executive Managing Director,
Capital Markets Group
[email protected]
4435 Eastgate Mall, Suite 200
San Diego, CA 92121
USA
Asia Pacific
AUSTRALIA
+ 612-9223-4888
Tony Anderson
[email protected]
Level 1, 60 Castlereagh Street
Sydney
NSW 2000
Australia
CHINA
+ 8621-2320-0808
Jack Ye
[email protected]
Units 2606-2609
The Headquarters Building
168 Xi Zang Zhong Lu
Shanghai 200001
China
HONG KONG
+ 852 2956 3888
Kent Fong
[email protected]
6/F Henley Building
5 Queen’s Road Central
Hong Kong
INDIA
+ 91124-469-5555
Manish Aggarwal
[email protected]
14th Floor, Tower C
Building 8, DLF Cyber City
Gurgaon 122002
India
INDONESIA
+ 6221-2550-9500
Handa Sulaiman
[email protected]
Indonesia Stock Exchange Building Tower 2
15/F, JI. Jend. Sudirman Kax.52-53
Jakarta 12190
Indonesia
JAPAN
+ 813 3596 7070
Todd Olson
[email protected]
Otemachi Building, 5F
1-6-1 Otemachi
Chiyoda-ku, Tokyo 100-6320
Japan
REPUBLIC OF KOREA
+ 822-3188-322
Shawna Yang
[email protected]
5/F Korea Computer Building
21, Sogong-dong
Seoul
Republic of Korea
SINGAPORE
+65 6535 3232
Donald Han
[email protected]
20 Raffles Place
#13-01 Ocean Towers
Singapore 048620
VIETNAM
+ 84 8 6291 4707
Toby Dodd
[email protected]
The Pathfinder Building
Level 3, 52 Dong Du Street
Ben Nghe Ward, Dist.1
Ho Chi Minh City
Vietnam
EMEA
BELGIUM
+32 2514 4000
Maxime Xantippe – Managing Partner
[email protected]
Avenue des Arts, 58 bte 7
Kunstlaan 58 bus 7
1000 Brussels
Belgium
CZECH REPUBLIC
+420 234 603 603
Jonathan Hallett – Managing Partner
[email protected]
James Chapman –
Partner, Head of Capital Markets
[email protected]
Na Prikope 1
110 00 Prague 1
Czech Republic
FRANCE
Paris
+33 1 53 76 92 92
Olivier Gérard –
President of Cushman & Wakefield,
Head of Capital Markets
[email protected]
11-13 avenue de Friedland
75008 Paris
France
GERMANY
Berlin
+49 30 2021446-0
Stefan Schober – Partner, Capital Markets
[email protected]
Jägerstraße 41
10117 Berlin
Germany
Düsseldorf
+49 211 90 80 8-0
Düsseldorfer Straße 189
40545 Düsseldorf
Germany
Frankfurt
+49 69 50 60 730
Martin Brühl – Managing Partner
[email protected]
Martin Braun – Partner, Head of Capital
Markets & Corporate Finance
[email protected]
Westhafenplatz 6
60327 Frankfurt am Main
Germany
Hamburg
+49 40 300 88 11-0
Dr. Michael Thiele – Partner
[email protected]
Hermannstraße 22
20095 Hamburg
Germany
München
+49 89 242 14 33-0
Peter Valy – Partner, Capital Markets
[email protected]
Maximilianstraße 40
80539 München
Germany
25
CAPITAL MARKETS CONTACTS INTERNATIONAL INVESTMENT ATLAS SUMMARY 2011
HUNGARY
+36 1 268 1288
Charles D. Taylor –
Managing Director,
Head of Capital Markets
[email protected]
Deák Palota
Deák Ferenc utca 15
Budapest 1052
Hungary
ITALY
Bologna
+39 051 230 410
Marco De Stefani – Partner
[email protected]
Via Augusto Righi 19
40126 Bologna
Italy
Milan
+39 02 63 7991
Stephen Screene –
Partner, Head of Capital Markets Group
[email protected]
Via F. Turati 16/18
20121 Milan
Italy
Rome
+39 06 4200791
Joachim Sandberg –
Partner, Head of Office
[email protected]
Via Vittorio Veneto 54b
00187 Rome
Italy
NETHERLANDS
+31 20 800 2000
Jan-Willem Bastijn – Managing Partner
[email protected]
Mathijs Flierman –
Partner, Head of Capital Markets
[email protected]
Atrium, 3e verdieping/3rd Floor
Strawinskylaan 3125
1077 ZX Amsterdam
Netherlands
POLAND
+48 22 820 20 20
Richard Petersen – Managing Partner
[email protected]
Mathieu Giguére –
Associate, Head of Capital Markets
[email protected]
Metropolitan
Plac Pilsudskiego 1
00-078 Warsaw
Poland
PORTUGAL
+351 21 322 4757
Eric van Leuven – Managing Partner
[email protected]
Luis Antunes –
Partner, Head of Capital Markets
[email protected]
Avenida da Liberdade 131
2nd Floor
1250-140 Lisbon
Portugal
ROMANIA
+40 21 408 0300
Razvan Gheorghe –
Partner, Managing Director
[email protected]
Costel Florea –
Partner, Head of Capital Markets
[email protected]
Opera Center, 2 Dr. Nicolae Staicovici St.
4th Floor, Sector 5, Bucharest
Romania
RUSSIA
+7 495 797 9600
Mark Stiles – Partner
[email protected]
Tom Cashel –
Partner, Head of Capital Markets
[email protected]
Ducat Place III, 6th Floor
Gasheka str, 6
125047 Moscow
Russia
SLOVAKIA
+421 2 5920 9333
Andrew Thompson – Managing Partner
[email protected]
James Chapman –
Partner, Head of Capital Markets
[email protected]
Mostová 2
811 01 Bratislava
Slovakia
SPAIN
Barcelona
+ 34 934 881 881
Roger Cooke – Managing Partner
[email protected]
Reno Cardiff – Partner, Capital Markets
[email protected]
Passeig de Gràcia 56-7°C
08007 Barcelona, Spain
Madrid
+34 91 781 00 10
Roger Cooke – Managing Partner
[email protected]
Rupert Lea – Partner, Capital Markets
[email protected]
Edificio Beatriz
José Ortega y Gasset, 29-6a Plta
28006 Madrid, Spain
SWEDEN
+468 545 677 00
Magnus Lange – Partner, Head of Office
[email protected]
Sergels Torg 12
SE-111 57 Stockholm
Sweden
TURKEY
+90 212 334 78 00
Rahsan Cebe – Partner, Head of Office
[email protected]
Inönü Cad. Devres Han No. 50 2/A
Gümüssuyu 34437
Beyoglu
Istanbul, Turkiye
UNITED ARAB EMIRATES
Dubai
+971 4 7017152
Michael Atwell – Partner, Head of Office
[email protected]
Unit 151, Building 6EB
Dubai Airport Free Zone
Dubai
PO Box 54914
U.A.E
UNITED KINGDOM
Birmingham
+44 121 232 4900
Scott Rutherford –
Partner, Head of Office
scott.rutherford.eur.cushwake.com
9 Colmore Row
Birmingham B3 2BJ
England
Edinburgh
+44 131 226 8700
Steven Newlands –
Partner, Capital Markets
[email protected]
66 Hanover Street
Edinburgh EA2 1EL
Scotland
Glasgow
+44 141 248 4433
David Davidson –
Partner, Head of Capital Markets
[email protected]
223 West George Street
Glasgow G2 2ND
Scotland
London
+44 20 7935 5000
David Erwin –
Partner, Chairman UK Capital Markets
[email protected]
43/45 Portman Square
London W1A 3BG
England
Manchester
+44 161 837 3555
Tony Bray – Partner, Head of Office
[email protected]
26 Spring Gardens
Manchester M2 1AB
England
For all other EMEA enquiries contact
Michael Rhydderch – Partner,
Head of Capital Markets EMEA
[email protected]
43/45 Portman Square
London W1A 3BG
England
www.cusbmanwakeñelo.com
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