ABN AMRO Real Estate Market update 2015 Q1 by ABN AMRO

ABN AMRO Real Estate Market update

Real Estate Advisory May 2015

Dutch economy in international perspective Economic sentiment in the Eurozone increased 

The first quarter, the Economic Sentiment Indicator (ESI), reported three consecutive months of improvements on the back of a strong increase in confidence in the services sector.



In contrast to the Eurozone the Netherlands reported a drop (-1.2) as negatives in the construction and industrial sector overshadowed an increase of confidence of consumers and the services sector.



Looking at other countries we see that during the fist quarter Italy (+5.3) and Spain (+3.4) showed strong increases, while Germany (+0.4) and France (+0.8) were only small positives.



In April, after three consecutive months of improvements, the ESI remained broadly unchanged in both the euro area and the Netherlands.

The Dutch ESI is in line with the Eurozone 130 120 110 100 90 80 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q '10

'11

'12

The Netherlands Belgium Eurozone

Yields on Dutch government bonds to remain low While yields on German and Dutch government bonds showed small increases at the end of April, ABN AMRO economists expect yields to remain low.



The economists revised their estimates slightly upwards and now expect the 10-year Yield to be at 1.4% at the end of 216 compared to 1.0% previously.

 Source: CBS, Datastream and IPD

This increase can be explained by more positive macro-economic data, which could prompt the ECB to unwind the asset purchase program. However as core inflation remains low, ABN AMRO expects the ECB to continue the program and does not foresee interest rates increases before 2016.

'14

'15

Germany UK France

Yield on 10-year government bonds (%)



'13

2 1 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q '10

'11

'12

The Netherlands France UK

'13

'14

'15

Germany Belgium

Dutch economy in focus – GDP growth broadly based GDP growth revised upward 



Economy grew further in the second half of 2014

The Dutch economy is growing faster than expected. In the fourth quarter GDP improved by 0.8% on a quarterly basis, instead of the 0.5% that was previously reported. Companies are hiring more staff, although preferably on flexible contracts. The growth in jobs has made consumers feel more positive. Consumer confidence is at its highest level in over seven years. Foreign trade remains important to the Dutch economy. In the fourth quarter exports rose by 4.5%. Dutch companies are benefiting from the economic recovery in the US & UK and favourable exchange rates.

3% 3 2% 2 1% 1 0% 0 -1% -1 -2 -2% -3 -3% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

'10 '11 Household consumption Total investment Net Exports

GDP is back on the rise but well below the level of 2008

'12

'13 '14 Public Expenditure Change in inventories GDP growth (qoq %)

Competiveness improves due to favourable exchange rate

650

115

1.6

630

110

1.5

610

105

590

100

570

1.4 1.3

550

1.1

90 '05

Source: CBS, Datastream and Directorate General for Economic and Financial Affairs (DG ECOFIN)

1.2

'06

'07

'08

'09

'10

'11

'12

'13

'14

BBP totaal vier rolling) kwartalen) GDP(EUR (EURmld. bn-12 months

'15

1 '05

'06

'07

'08

'09

'10

'11

Reëel effectieve wisselkoers Real effective exchange rate

'12

'13

'14

'15

(rhs) EUR/USD (ra)

The market is off to a good start in 2015 Investment volume remains solid

Investment volumes per quarter (EUR bn)

 During the first quarter, investment volume came in at EUR 1.6bn, most deals where already announced before the end of last year.  Of the investment volume 98% was attributable to the following four asset classes: • • • •

Offices: EUR 287m (+10% yoy) Retail: EUR 265m (-66% yoy) Residential: EUR 710m (+189% yoy) Logistics / industrial: EUR 282m (-10% yoy)

9 6 3

 Overall take-up was solid, demand for warehouses increased 97% compared to one year earlier.

0 2009

 Direct returns on offices and retail are attractive compared to surrounding countries. This partially explains the continued interest in Dutch property from foreign investors.

Take-up volume per asset class (thousand sqm) 1,000

901

2010

2011 Q1

2012 Q2 Q3

2013 Q4

2014

2015

IPD: Direct return per country and asset class in 2014 (%) 9 8

750 458

500

7 6

250

191

241 166

151

5 4

0 Offices

Retail '14Q1

'15Q1

Warehouses

GE All

Retail

FR Office

UK Industrial

Residential

Source: Datastream, IPD and JLL

Offices: the economic recovery underpins demand from investors Asian consortium makes entry on the Zuidas

Improving occupier demand further drives investor demand 

First Sponsor Group Limited, an Asian real estate investor buys with Asian private investors Zuiderhof I in Amsterdam ifom investment manager AEW Europe. The buyer notifies a purchase price of € 51.5 million. Seller of the property is Euroffice 445. This is the first transaction of First Sponsor Group Limited who stated it wishes to do more acquisitions in the Netherlands.



As corporate spending recovers so does the job market. There have been fewer dismissal applications. Companies are also hiring more staff. Although they prefer to do so on flexible contracts. Investment volume in the first quarter came in at EUR 287m, and was dominated by transactions in Amsterdam that accounted for 59%. This was helped by one large transaction at the Zuidas (Zuiderhof I, EUR 52m). 2015 had good start as take-up during the first quarter increased 26% to 241k sqm helped by large transactions in the public sector, vacancy came in at 12.7% 1Q ‘15 vs. 13.1% EOY 2014

Macroeconomic factors (in %) 4

2 1

-1 -10

-2 -3

-20 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

During the first quarter of 2015 the IPD-index reported an income return of 5.4% and capital growth at -2.6%.

'10

'11 '12 GDP growth (yoy %)

'13

'14

Job vacancies growth (yoy %) (rhs) "White collar" job vacancies growth (yoy %) (rhs) PropertyNL, 20 February 2015

Supply take-up and vacancy (JLL)

Investment returns (IPD)

10,000

8,000

12 8 4

6,000 8

4,000 4

2,000

-8

0 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q

Source:Datastream, CBS, JLL, ABU and IPD

-4

'10

'11

'12

'13

Supply (sqm x1000) Take-up as % of supply (rhs) Vacancy % (rhs)

'14

'15

-12 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q1

'10

'11

'12

'13

'14

'15

Capital growth (% 12m rolling) Income return (% 12m rolling) Total return (% 12m rolling) 5

Residential: Sentiment remains positive as the market stabilizes Outlook is positive, confidence is back at the level of 2004 



After a buoyant fourth quarter the market seems to have calmed down and stabilised somewhat while the number of transactions still lies well above the level of Q1 2014. The number of transactions has continued to pick up despite the fact that the temporary expansion of the donation tax exemption scheme came to an end on 1 January and credit standards have tightened further this year.



The general outlook remains positive as market sentiment has been stable for the last 7 months, at the highest level since 2004.



During the first quarter of 2015 the IPD-index reported an income return of 4.7% and capital growth at 1.5%.

Macroeconomic factors (in %) 6

-2

-4

5 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q '10

'11

'12

'13

'14

'15

GDP growth (yoy %) Interest rate on new mortgages (avg duration) Affordability (housing cost/disposable income) (rhs)

Number of transactions and market sentiment

Investment returns and market rent changes (%) (IPD)

150

120

140

100

130

2 60

120

0 -2

-4

100

-6

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

110

'10 Source: CBS, Datastream, Calcasa , IPD and DNB

'11

'12

'13

'14

'15

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q '10

'11

'12

# of transactions 12-months rolling

Capital growth (% 12m rolling)

Average price (indexed, '10Q1 =100) (rhs)

Total return (% 12m rolling)

VEH market sentiment

'13

'14

'15

Income return (% 12m rolling)

Retail: Structural trends remain in tact, as international retailers continue to dominate the market Vastned: ”polarization in Dutch retail”

Consumer confidence is at the highest level 

Prime locations in popular cities show rents string increases, while elsewhere rents are decreasing.

 This signals the listed property company Vastned who published first quarter results. The contrast between popular and less popular sites is clearly visible. This is in accordance with the company’s strategy to invest in large cities. FD, May 11

 



Economy: Retail sales are back on the rise

Consumer confidence is at its highest level in seven years. This optimism is supported by rising share prices and increased spending power. However, retailers are still under pressure. Large retailers such as V&D and Blokker have announced reorganisations and recently Miss Etam (fashion) filed for bankruptcy. Traditionally take-up is relatively low in the first quarter. Take up in the first quarter came in at 151k sqm, 9% below the level of 2014. Demand focus on prime retail in large cities. Demand is improving across all prime retail segments in the top 20 cities, with the prime high street and luxury segments continuing to perform particularly well.

0 -10

-2

-30

-4 -6

-50 '05

'07

'11

'13

'15

Retail sales (% growth, 12-month rolling)) Consumer confidence (rhs)

During the first quarter of 2015; the IPD-index reported an income return of 6.1% and capital growth of -3.1%.

Supply, take-up and vacancy (JLL)

'09

Investment returns (IPD)

4,000

3,000

2,000

12 8 4 0

1,000

0 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q

'10 Source: CBS, Datastream, CBRE, Locatus, JLL and IPD

'11

'12

'13

Supply (sqm x1000) Take-up as % of supply (rhs) Vacancy (% of rental value)

'14

'15

-4 -8 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q '10

'11

'12

'13

'14

'15

Income return (% 12m rolling) Capital growth (% 12m rolling) Total return (% 12m rolling) 7

Logistical / industrial: Positive economic environment will continue to benefit the market Economic conditions remain positive 



 

The transport sector is outperforming (in %)

International trade remains an important contributor. With exports likely to increase further in the course of the year. Companies are benefiting from the weaker Euro as well as the global recovery.

50 40 30 20 10 0 -10 -20 -30 -40

4 2

Investment volume came in at EUR 252m in the first quarter. Largest investors were; PingProperties, WP Carey and Prologis. These three investors all bought +35.000sqm buildings.

0 -2

During the first quarter of 2015 the IPD-index reported an income return of 5.4% and capital growth at -2.6%.

-4

Given the fragmented nature of the industrial market and the modest allocation of capital to industrial in the benchmark (4%), this might not be representative of the Dutch market.

-8

-6 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q '10

'11

'12

'13

'14

'15

GDP growth (yoy %) GDP of storage & transport (yoy %) Vacancies, transport & storage (yoy %) (rhs)

Supply, take-up and vacancy (JLL)

Investment returns (IPD)

15,000

12,000

12 3

9,000 8 6,000

0 -3

3,000

-6

0 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q

Source: CBS, Datastream and IPD

'10

'11

'12

'13

Supply (sqm x1000) Take-up as % of supply (rhs) Vacancy % (rhs)

'14

'15

-9 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q '10

'11

'12

Capital growth (% 12m rolling)

'13

'14

'15

Income return (% 12m rolling)

Total return (% 12m rolling) 8

Recent transactions – Offices Date

Asset

Description

Vendor & purchaser

Pricing

2015 Q2

INIT Building

 34,000sqm office space  Czaar Peterstraat 213, Amsterdam

 Vendor: EuroPrisa Amsterdam Init  Purchaser: Lone Star Funds

 EUR: 58.8m  Yield: NA  EUR/sqm:1,729

2015 Q2

Leeuwenburg

 64,000sqm office space  Weesperzijde 190, Amsterdam

 Vendor: Van der Vorm Vastgoed  Purchaser: Vastint Netherlands B.V.

 EUR: 61m  Yield: NA  EUR/sqm: 953

2015 Q2

Alexander Portfolio

 Three buildings: New Tide. Signum, and New Delphi  34,000sqm office space

 Vendor: Sachwerte Rendite Fonds Holland 53  Purchaser: OVG Real Estate

 NA

2015 Q1

Zuiderhof I

 12,538sqm office space  Jachthavenweg 121, Amsterdam

 Vendor: AEW (Euroffice 445 BV)  Purchaser: First Sponsor Group Limited

 EUR: 51.5m  Yield: NA  EUR/sqm: 4,108

2015 Q1

Rabobank

 28,000 sqm office space  Fellenoord 15, Eindhoven

 Vendor: OVG Real Estate  Purchaser: WP Carey

 Amount: EUR 30.8m  Yield: NA  EUR/sqm: EUR 1,100

2015 Q1

The New Loft Offices

 7,670sqm office space  De passage 126-136, Amsterdam

 Vendor: APF International  Purchaser: Credit Suisse

 Amount: EUR 18.4m  Yield: NA  EUR/sqm: EUR 2,399

Recent transactions – Residential Date

Asset

Description

Vendor & purchaser

Pricing

2015 Q1

Portfolio

 WIF Portfolio  3,786 units

 Vendor: Wooninvesteringsfonds  Purchaser: Round Hill Capital

 Amount: EUR 365m  Yield: 7.0%-7.5% (GIY)  Price per unit: EUR 96.4k

2015 Q1

Portfolio

 500 Multifamily units

 Vendor: CBRE Global Investors  Purchaser: Round Hill Capital

 Amount: EUR 54m  Yield: NA  Price per unit: EUR 108k

2015 Q1

Portfolio

 Bergen op Zoom, Geldrop, Haarlem en Voorschoten ong.  500 Multifamily units

 Vendor: Delta Lloyd Vastgoed  Purchaser: private investor

 Amount: EUR 53m  Yield: NA  Price per unit: EUR 106k

2015 Q1

Portfolio

 465 Multifamily units

 Vendor: Staalbankiers  Purchaser: Round Hill Capital

 Amount: EUR 45m  Yield: NA  Price per unit: EUR 96.8k

2014 Q4

Portfolio

 Vestia Portfolio  4157 units

 Vendor: Vestia  Purchaser: Patrizia

 Amount: EUR 458.2m  Yield: NA  Price per unit EUR 110k

Recent transactions - Retail Date

Asset

Description

Vendor & purchaser

Pricing

2015 Q2

Kalverstraat 11-17/Rokin 1216, Amsterdam

 Premium shopping centre  6,000sqm

 Vendor: private investors  Purchaser: Vastned

 EUR: 108m  Yield: NA  EUR/sqm: 18,000

2015 Q2

Haaglanden Megastores

 Shopping Centre  85,000sqm

 Vendor: ING  Purchaser: Meijer Realty Partners (MRP)

 EUR: 66m  Yield: NA  EUR/sqm: 776

2015 Q1

W.C. Waterlandplein, Amsterdam

 Shopping centre  9,600sqm

 Vendor: Ymere  Purchaser: Optare Rei

 EUR 28.5m  Yield: NA  EUR/sqm: EUR 2,965

2015 Q1

Woonboulevard Westpoort, Amsterdam

 Retail Warehouse Park  45,000sqm

 Vendor: Unknown  Purchaser: VALAD

 EUR 20.0m  Yield: NA  EUR/sqm: 444

2014 Q4

Project 14, portfolio

 Shopping Centre  108,500sqm

 Vendor: CBRE Global  EUR 240.3m Investors  Yield: NA  Purchaser: The  EUR/sqm: 2,214 Blackstone Group International Partners LLP

2014 Q4

Kalvertoren, Amsterdam

 Shopping centre  11,500sqm

 Vendor: Rreef Investment  Purchaser: Kroonenberg groep

 EUR 117.5m  Yield: NA  EUR/sqm: 10,217

Recent transactions - Logistics Date

Asset

Description

2015 Q2

Portfolio

 17 assets in the  Vendor: Various Netherlands and Germany  Purchaser: Mstar (joint  181,000sqm venture)

 EUR: 74.5m  Yield: NA  EUR/sqm: 411

2015 Q1

Nippon Express Distribution Centre

 70,906sqm  Rotterdam

 Vendor: Borghese Logistics  Purchaser: WP Carey

 EUR: 37.5m  Yield: 6.25 - 6.75% (GIY)  EUR/sqm: 529

2015 Q1

Verscentrum AH

 40,200sqm  Nieuwegein

 Vendor: Borghese Real Estate  Purchaser: Prologis European Properties

 EUR: 36.9m  Yield: 6.5 - 7.0% (GIY)  EUR/sqm: 917

2014 Q4

Afrikahaven Distribution Centre

 107,344sqm  Amsterdam

 Vendor: DHG  Purchaser: Delin Capital Asset Management (DCAM)

 Amount: EUR 68.5m  Yield: NA  EUR/sqm: 638

2014 Q4

Van Uden Distribution Centre  44,143sqm  Waddinxveen

 Vendor: Unknown  Purchaser: Delin Capital Asset Management (DCAM)

 Amount: EUR 38.0m  Yield: N/A  EUR/sqm: 861

2014 Q4

Lage Weide Distribution Centre

 Vendor: Somerset Real Estate  Purchaser: USAA Realco

 Amount: EUR 33.7m  Yield: NA  EUR/sqm: 506

 66,592sqm  Utrecht

Vendor & purchaser

Pricing

The Real Estate Advisory Team Erik Steinmaier Head of Real Estate Advisory + 31 20 343 64 19 erik.steinmaier@nl.abnamro.com Andy Kloppenburg Director + 31 20 383 92 78 andy.kloppenburg@nl.abnamro.com Steven Vlek Senior Associate + 31 20 383 51 45 steven.vlek@nl.abnamro.com

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