Introducing the M&G Real Estate European Connectivity Rankings

Transcription

1 April 2017 Introducing the M&G Real Estate European Connectivity Rankings Part of the M&G Group

2 Contents Introduction 3 Mega trends 3 Connectivity 3 Urbanisation 4 How Big Data can help 4 Measuring urban connectivity 4 Connectivity scores and rankings 5 Top city performers 5 Top performers by enablers 6 Top performers by effects 6 Where is the value? 8 Analysis 8 Implications for real estate investors 10 Helsinki: Potential connectivity climber 10 Appendices City connectivity rankings 11 Methodology 13 Connectivity metrics: enablers 14 Connectivity metrics: effects 15 City density classification 16 Connectivity scores vs yields 18 2

3 1. Introduction Connectivity is the smart physical and digital infrastructure that make our cities tick and helps their economies to grow. It keeps the wheels of our transport systems turning smoothly. And crucially, it brings together residents, visitors, businesses and public and private institutions. The power of connectivity doesn t stop there. At M&G Real Estate, we believe that well-serviced connectivity infrastructures help to underpin a city s property fundamentals too. We also believe that a better understanding of connectivity can help investors to identify relative value opportunities in real estate and to future-proof their investments more effectively. That s why we developed the M&G Real Estate European Connectivity Rankings to grade 64 European cities 1 based on their capacity to improve physical and digital urban connectivity in the face of the growing density pressures that face Europe s cities today. The table below highlights a snapshot of our top-10 city performers based on their final connectivity scores. In this paper, we outline the methodology behind our rankings, with the complete rankings appearing on page 11 of the Appendix. Fig 1.1 Top 10 city performers Total Connectivity Rank City Density* Total Enabler Rank Total Effects Rank 1 Paris High Berlin Medium Stuttgart Medium Zurich Medium Stockholm Medium Amsterdam Medium Munich Medium London High Bremen Low Luxembourg Low 18 4 Source: M&G Real Estate, December *Please see Appendix 5 for the definition of city density. Mega trends Connectivity Good density, according to the Urban Land Institute (ULI), is defined by four drivers: technology, capital, urban form and design, and infrastructure and connectivity. And the results of good urban density include elements of mixed-use design, connectivity, green spaces, cohesiveness and liveability (Figure 1.2). Fig 1.2: Densification: Drivers, dividends and debates Densification Enablers and Secondary Drivers Technology Capital Urban Form and Design Infrastructure and Connectivity Mixed Use Connected Planned Spacious Monotonous Isolated Unmanaged Unliveable Liveable Outcomes of Good Density Cohesive Crowded Outcomes of Bad Density Conspicuous Incremental Designed Green Appropriate Segregated Inflexible Ugly Polluting Source: Density: drivers, dividends and debates, June 2015, Urban Land Institute. 1 Our analysis utilises annual PMA prime rent and yield data for these 64 European cities. 3

4 % Total Population % of population Urbanisation Over 70% of Europeans live in cities and the urban areas around them, with that figure expected to reach 80% by And with around 85% of European GDP generated in cities, this backbone of the region s economy is only set to grow in importance. Fig 1.3: Europe urban and rural population (% total ) Urban Source: United Nations, Rural F2020 F2030 F2040 F2050 However, the physical infrastructures needed to support growing cities are struggling to cope and housing demand is outpacing supply. This kind of densification does not fit the model envisaged by the ULI and is evident across the EU where the overcrowding rate of households, as measured by Eurostat, is higher in cities (c.18%) than in towns and suburbs (c.14%) or rural areas (c.7%). Fig 1.4: EU27: Overcrowding rate by degree of urbanisation (2015)* Cities Towns and suburbs Rural areas *The overcrowding rate describes the proportion of people living in an overcrowded dwelling, as defined by the number of rooms available to the household, the household s size, as well as its members ages and their family situation. Source: Eurostat. Demand for better connectivity is also being boosted by an unprecedented wave of migration as more people move into European cities to live and work. Business and tourist travel is also on the rise as travel becomes more affordable, new routes become available, the stock of short-stay accommodation improves, and income levels rise in Asia and elsewhere. How Big Data can help Big Data could help to plug the funding gap and break the link between economic growth and congestion with cheap data-based solutions. The range, volume and frequency of data are growing rapidly as cities start to install sensors into everything from streetlights to parking bays. By next year already, some 80% of cars in Western Europe will be able to receive and generate realtime traffic data, according to INRIX. In addition, some cities like Gothenburg in Sweden are pressing ahead with autonomous car technology, aiming to introduce 100 driverless cars on their roads by end Taken together, that suggests congestion looks set to fall as more travellers are diverted at peak hours from crowded routes to less-packed ones. Indeed, there is already some evidence of that: despite London s relatively poor overall showing, research by INRIX shows that traffic signal optimisation and smart motorways are proving successful at reducing traffic congestion in the UK capital and on its principal motorway, the M25 2. Emissions of pollutants should also fall, because fewer vehicles would be idling in traffic jams and there would be fewer cars on the street. Applying data analytics to create intelligent transportation systems will play a key role in improving urban connectivity, in line with predictions that Big Data will boost European GDP by 1.9% by Measuring urban connectivity In this study, we measure how the physical and digital infrastructures, both public and private, performed in 64 European cities. Our objective is to identify real estate value in dense, sustainable and well-connected urban centres from a connectivity perspective. Our assumption is that relatively high scores support strong real estate fundamentals. Cities with the most visionary connectivity policies are more likely to continue to attract talented people despite rising density pressures like traffic congestion and carbon emissions. We split the connectivity metrics we track into two categories: enablers and effects. Enablers can be considered as urban connectivity inputs (e.g. city mobility strategy, Wi-fi speed, the coverage of Real Time Passenger Information apps), while effects can be considered urban connectivity outputs (e.g. network affordability, transport carbon emissions, safety). A more detailed breakdown of evaluation indicators is outlined in the Methodology section at the end of this paper. 2 Source: Inrix. 4

5 2. Connectivity scores and rankings Fig 1.1 on page 3 shows our top-10 city performers based on their connectivity scores and the graphic below maps the 64 reviewed cities across Europe: the larger the bubble the higher the connectivity score. Fig 2.1: Total connectivity score map Oslo Espoo Helsinki Stockholm Gothenburg Aberdeen Århus Glasgow Edinburgh Copenhagen Malmo Dublin Manchester Birmingham Oxford Bristol Leeds Cambridge Rotterdam London The Hague Guildford Brussels Lille Amsterdam Berlin Hamburg Hanover Urtrecht Bremen Leipzig Eindhoven Dortmund Dresden Düsseldorf Antwerp Frankfurt Cologne Mannheim Luxembourg Nürnberg Munich Prague Warsaw Paris Stuttgart Nantes Bordeaux Zurich Vienna Toulouse Lyon Milan Bologna Montpellier Marseille Nice Rome Valencia Barcelona Naples Madrid Lisbon Sevilla Source: M&G Real Estate, December Top city performers Paris, Berlin and Stuttgart top the total connectivity rankings. Paris performs particularly well in Real-Time Passenger Information (RTPI) coverage and green transport modes, with 83% of journeys to work made using public transport, cycling or walking. Conversely, peripheral European cities, such as Naples, Arhus, Montpellier and Seville, appear at the bottom of the rankings. To dig deeper into these results, we plotted enabler scores against effect scores by density category (Fig 2.2). German, French and Swiss cities dominate the top 10 positions. The common denominator is the relatively higher levels of investment per capita on transport infrastructure and maintenance. 5

6 Fig 2.2: Enabler vs effects scores by density category Enablers score 100 Berlin London Paris Stuttgart Zurich Munich Amsterdam 90 Stockholm Barcelona Dublin Lyon Bremen Hamburg 80 Lisbon Frankfurt Rotterdam Vienna Oxford 70 Luxembourg Milan Madrid Gothenburg Copenhagen Warsaw 60 Brussels Rome Bristol Hanover Toulouse Malmo Helsinki Dresden 50 Leipzig Düsseldorf Cambridge Lille Manchester Urtrecht Valencia Nantes 40 Edinburgh Mannheim 30 Dortmund Oslo Cologne Antwerp The Hague Aberdeen Bologna Nice 20 Marseille Leeds Eindhoven Naples Guildford 10 Sevilla Bordeaux Glasgow Prague Montpellier Århus Espoo Effects score High Density Medium Density Low Density Source: M&G Real Estate, December We found that high-density cities generally score relatively better when it comes to enabler indicators, while lowdensity cities have higher effect scores. Medium-density cities tend to fall somewhere in between. Fig 2.3: Average city connectivity score by density category Density Category Total Connectivity Enablers High Medium Low Source: M&G Real Estate, December 2016 Effects However, there are notable exceptions in each density category. In our view, it is these cities that, from a connectivity perspective, hold the most promise for real estate investors beyond Europe s more liquid gateway markets because they could represent a source of latent value. Enablers: Top city performers Paris has the highest enabler score, followed by Berlin and Stuttgart. Conversely, Montpellier, Prague and Nuremberg have the lowest scores. Among the high-density cities, London and Barcelona are particularly strong in the areas of RTPI app coverage, green transport mode provision and mobility strategy. Barcelona s score is high because it was one of the first European Demonstration Cities to adhere to CIVITAS objectives when the initiative was first launched in The Catalan city s Municipal Council for the Environment and Sustainability also launched its Agenda 21 agenda that year, whose commitments were renewed in 2013 and include plans to improve mobility and make pedestrian life a welcoming setting. Among medium-density cities, Stuttgart, Zurich and Amsterdam also achieve high enabler scores. With an average broadband speed of 85Mbps, Stuttgart provides the fastest downloading speed by far across the reviewed cities, boosting its Wi-Fi speed score. Amsterdam ranks second with a Wi-Fi speed score of 80Mbps, which supports the Dutch capital s portfolio of smart city projects, including a public city dashboard that displays updated statistics on transport, environment, community, culture and security every 10 seconds 3. Zurich s enabler score is boosted by its RTPI app coverage indicator. Typically, tourist destinations such as Berlin, Lisbon and London score relatively well on this measure. Digital connectivity is also recognised as critical infrastructure in the Mayor of London s 2050 Plan, which aims to improve connectivity in underserved areas. Effects: Top city performers Espoo, Nantes and Luxembourg all low-density cities occupy the top-three positions in the effects rankings. Bremen Bremen, a top-10 ranked low-density city, scores relatively highly in terms of average commute time (25 minutes), safety and security (0.11 road deaths per 10,000 population), as well as low carbon emissions (25% due 3 Source: 6

7 to transport). Bremen s efforts in the field of promoting cleaner and more sustainable public transport were recognised when the city received a CIVITAS award in 2014 for Urban mobility and social inclusion Planning accessibility for more sustainable cities. A number of transport-related engagement tools introduced in the city, including an online geo-referenced consultation platform, also helped Bremen to win the accolade. In common with all the German cities we reviewed, Bremen performs consistently well on transport emissions. This is driven by the Low Emissions Zones (LEZs) it introduced in 2008 with the aim of improving air quality by restricting polluting vehicles within defined areas. Vienna Among the top-10 ranked medium-density cities, Vienna scores relatively high on affordability (1.4% of GDP per capita spent on public transport) and safety and security (0.10 road deaths per 10,000 population). We understand Vienna is in the process of creating a living lab that will test designs and systems to implement intelligent traffic solutions, green buildings, water management and a smart grid infrastructure across the city. In the long term, this initiative will serve to boost its score both in terms of enabler as well as effect indicators, and could see it climb our rankings when next updated. Aberdeen Among the UK s low-density cities, Aberdeen achieves the highest score in terms of effects, boosted by affordability (the cost of a monthly travel card on public transport equates to 1.5% of monthly GDP per capita) carbon emission (13% due to transport) and award indicators. In 2014, the European Commission awarded the city a European Mobility Week award. Aberdeen s Sustainable Urban Mobility Plan was recognised for addressing social and economic objectives including a focus on sustainable transport. The plan was developed in close consultation with citizens and stakeholders, with almost 500 people completing online surveys or providing feedback through social media. 7

8 3. Where is the value? The following section builds on the previous analysis by linking total connectivity scores to market yields by density category, as shown in Fig 3.1 below. The aim here is to support the investment decision-making process by identifying relative pricing opportunities from a connectivity perspective. Fig 3.1: Yield vs connectivity scores by density category 8.0 Naples Prime office yield (end 2015) Montpellier Leeds Prague Glasgow Antwerp Nuremberg Birmingham The Hague Edinburgh Cologne Bordeaux Guildford Marseille Dortmund Mannheim Leipzig Brussels Bristol Manchester Rome Espoo Düsseldorf Aberdeen Cambridge Oslo Lille Zurich Weighted connectivity score Bologna Dresden Milan Madrid Urtrecht Toulouse Nantes Lisbon Warsaw Hanover Helsinki Frankfurt High Density Medium Density Low Density Rotterdam Malmo Copenhagen Gothenburg Dublin Barcelona Lyon Vienna London Bremen Amsterdam Stuttgart Hamburg Munich Luxembourg Berlin Paris Stockholm Source: PMA, M&G Real Estate, December Analysis The relationship between scores and market yields shows that the more connected the city, the lower the yield. Many of the cities that achieve high connectivity scores are also among the most liquid investment markets. High-density cities like Paris, London and Barcelona, for example, achieve top-quartile total connectivity scores. They also offer keen property yields, well below 5%. Paris and London are the most liquid European markets, attracting average annual investment volumes in excess of 6 billion per annum since Some medium-density cities, namely Stockholm, Munich and Berlin also offer investors high connectivity scores at a relatively keen price. For the same top-quartile connectivity score, select medium- and low-density cities offer higher property yields. These include Amsterdam, Lyon and Rotterdam, as well as Bremen, Luxembourg and Malmö. While these are relatively less liquid markets, the maturity and performance of their connectivity infrastructures can offer yield discounts above 200 basis points compared with high-density cities. Among high-density cities, Naples is a clear loser in the connectivity rankings and this is reflected in the higher yield. Relatively higher yields are also reflected in the bottom quartile connectivity scores of medium- and low-density cities such as Antwerp, Montpellier and The Hague. Nuremberg, Birmingham and Cologne are also low-quartile performers but offer keen yields below 5%. Clearly, while the relationship between connectivity and yields is broadly downward trending, the scores are wide ranging, highlighting the fact that a number of other urbanisation and real estate drivers also contribute to market pricing. These could include liquidity, a tight supply-demand balance, or alternative density enablers such as innovation. When seeking value beyond traditional gateway markets, we believe that investors should target cities that achieve a combination of high enabler and effect scores (ideally above 50). We believe this optimal balance of density drivers is more likely to efficiently service densification pressures and support strong property fundamentals. Of the reviewed cities, 18 fall into this category of relatively high enabler and effect scores. They comprise a range of high-, medium- and low-density cities and are shown in Figure 3.2. At 6.0%, Toulouse offers the highest yield. It is also easily the most southerly city in the list, followed by Lyon. Five of the cities are in the Nordic region, with another five in Germany, including relatively high-yielding Bremen. The UK has only one entry in the shape of Bristol. 4 Source: CBRE, DTZ, Eurostat, M&G Real Estate. 8

9 Fig 3.2: All round connectivity winners Enabler score: 51 to 100 Effect score: 51 to 100 City Market yield (%) City Market yield (%) Toulouse 6.0 Helsinki 4.9 Warsaw 5.7 Copenhagen 4.5 Bremen 5.6 Stuttgart 4.5 Rotterdam 5.5 Gothenburg 4.5 Dresden 5.4 Vienna 4.4 Lyon 5.3 Berlin 4.3 Luxembourg 5.3 Frankfurt 4.2 Malmo 5.3 Stockholm 3.8 Bristol 5.0 Zurich 3.3 Key: High Density, Medium Density, Low Density Fig 3.3: How the other cities fare further down the ranking Enabler score: 0 to 50 Effect score: 51 to 100 Enabler score: 51 to 100 Effect score: 0 to 50 Enabler score: 0 to 50 Effect score: 0 to 50 City Market yield (%) City Market yield (%) City Market yield (%) Bologna 6.8 Lisbon 5.9 Naples 8.0 Utrecht 6.5 Brussels 5.2 Antwerp 6.8 Nantes 6.4 Hannover 5.2 Montpellier 6.5 Espoo 6.4 Amsterdam 5.1 The Hague 6.3 Aberdeen 6.0 Rome 4.8 Leeds 5.8 Bordeaux 6.0 Milan 4.5 Dortmund 5.5 Marseille 5.8 Dublin 4.4 Edinburgh 5.3 Mannheim 5.4 Barcelona 4.3 Glasgow 5.3 Prague 5.4 Hamburg 4.2 Leipzig 5.2 Lille 5.3 Madrid 4.0 Guildford 5.0 Cambridge 4.8 Munich 3.8 Nuremberg 5.0 Düsseldorf 4.4 Paris 3.5 Manchester 4.8 Oslo 4.3 London 3.5 Birmingham 4.8 Cologne 4.5 Key: High Density, Medium Density, Low Density Source: M&G Real Estate December 2016, PMA March

10 Implications for real estate investment For real estate investors seeking value, factors such as liquidity and supply-demand imbalances always need to be evaluated. But a city s connectivity performance is an increasingly important factor too. Access to cheap live transit data looks set to dramatically improve the way residents travel across urban centres. At a city level, low-cost intelligent transport solutions should radically improve digital and physical infrastructures, contributing to economic growth. As such, the scores of more peripheral European markets have the potential to improve substantially. live. The analysis developed here aims to identify those emerging locations that, from a connectivity perspective, are best-placed to deliver sustainable property fundamentals and superior pricing opportunities. The M&G Real Estate Connectivity Rankings will likely see risers and fallers in the years ahead as cities adopt smart technologies to withstand the evolving challenges that come with city living and working, and of course urban real estate investment. We highlight one such potential climber below. Technological advances can make smaller capital cities like Copenhagen and Helsinki and regional cities like Bremen and Malmö more attractive places to work and HELSINKI: Potential connectivity climber Helsinki comes in at number 21 in our rankings but has the potential to climb higher in the years ahead due to connectivity-friendly initiatives. By 2025 it hopes to make its centre car-free not by banning cars but by building a transport system that renders them redundant. Finland s sense of shared national endeavour is important here. To help roll out an ambitious new app that aims to provide the end-user with a bespoke and seamless solution in real time to all its transport problems, the city government is rewriting legislation to bring the laws covering different modes of transport into harmony. The app, which has been developed by MaaS Global (short for Mobility as a Service), is called Whim and the residents of Helsinki will soon be able to use it to travel across the city from early Whim mixes and matches a variety of participating public and private transport services. For example, Whim could suggest a bicycle from the city s bike-share scheme (if one is near your front door), followed by a train and then a taxi; an on-demand bus ( hail it on the app and it will come and pick you up); or a one-way car-share to a tram and a rented e-bike with a small electric motor. Once a route has been chosen it will make all the bookings needed, as well as ensuring that hire vehicles are available and public-transport sections are running on time. Costs will be displayed for every option, making clear the trade-offs between speed, comfort, and price. Customers will be able to buy one-off journeys or bundles modelled on mobile-phone contracts, allowing for a certain amount of travel each month. For perhaps 95 a month it might offer free city-wide public transport, 100km of local taxi use, 500km of car rental, and 1,500km on national public transport. Whim is precisely the type of technology that is changing the way we interact with the urban landscape, with implications for the real estate investment community. This technology could soon be replicated in England with suggestions of Birmingham as the next possible test case. Source: MIT Technology Review, The Economist, September

11 Appendix 1. City performance table Connectivity rankings Country City Density Category Total Rank Enabler Rank Effect Rank Total Score Enabler Score Effect Score France Paris High Germany Berlin Medium Germany Stuttgart Medium Switzerland Zurich Medium Sweden Stockholm Medium Netherlands Amsterdam Medium Germany Munich Medium UK London High Germany Bremen Low Luxembourg Luxembourg Low Germany Hamburg Medium France Lyon Medium Austria Vienna Medium Sweden Malmo Low Spain Barcelona High Ireland Dublin Low Netherlands Rotterdam Medium Germany Frankfurt Medium Denmark Copenhagen High Sweden Gothenburg Low Finland Helsinki Low UK Oxford Medium France Nantes Low Portugal Lisbon High Poland Warsaw Medium France Toulouse Low Germany Hannover Medium Netherlands Utrecht Medium Germany Dresden Low Spain Madrid High Italy Bologna Medium Italy Milan High France Lille Low UK Aberdeen Low UK Cambridge Low Norway Oslo Low Belgium Brussels High Finland Espoo Low Germany Düsseldorf Medium Netherlands Eindhoven Medium

12 Connectivity rankings (continued) Country City Density Category Total Rank Enabler Rank Effect Rank Total Score Enabler Score Effect Score Germany Leipzig Low Italy Rome Medium Germany Mannheim Medium Spain Valencia High UK Bristol Low Germany Dortmund Medium UK Manchester Medium France Marseille Low France Nice Low France Bordeaux Medium UK Edinburgh Low UK Guildford Low Germany Cologne Medium Netherlands The Hague Low UK Birmingham Medium Belgium Antwerp Medium Czech Republic Prague Medium UK Glasgow Medium Italy Naples High Denmark Århus Low UK Leeds Low Spain Sevilla Medium France Montpellier Low Germany Nuremberg Medium Source: M&G Real Estate, December

13 Appendix 2. Methodology City classification The reviewed cities are classified into density categories, as outlined below, and the full list appears at the end of this section. Average city connectivity score by density category Density Category High Medium Low Density criteria Above 5,000 residents per square km Between 2,001 and 4,999 residents per square km Up to 2,000 residents per square km For the purpose of density classification, the population and city area indicators were calculated within the Local Administrative Unit (LAU) as defined by Eurostat in A city is an LAU when the majority of the population lives in an urban centre of at least 50,000 inhabitants. City ranking and scores For the ranking exercise, connectivity indicators for each city were measured, which were further split into enablers and effects as outlined in Appendices 3 and 4. Please refer to Appendix 8 for references to data sources. Rank and score For each indicator we defined a point scale, with the maximum and minimum end of the scale being defined by the best and worst performance of the 64 cities. For each indicator, best performing cities were allocated up to a maximum of 100 and a minimum of 0 points. These scores were further weighted as outlined in Appendixes 3 and 4. Among the enabler indicators, we favoured provision of digital infrastructure such as Wi-Fi speed, transport app coverage as well as availability of green transport modes. Among the effect indicators, we favoured cities that favoured inclusivity of transport through high affordability scores as well as strong safety and environmental performance. The city that achieved the top score on all the weighted enabler and effect indicators achieved a score of 100. The cities were also ranked from 1 to 64, corresponding to the best and worst performer. Yields Prime office yields were used as a proxy for All Property yields as these sector yields were available for all the reviewed cities. Enablers The enabler indicators measure connectivity maturity including Wi-Fi speed, vision and strategy for future mobility, RTPI app coverage (e.g. Citymapper, Ally, Moovit), share of journeys to work using green transport modes, length of dedicated cycle paths per square kilometre, electric vehicle chargers within a 10km radius, car and ride sharing schemes. Effects The effect indicators measure connectivity performance, i.e. the degree to which connectivity-related goals are fulfilled in an effective and efficient manner. This includes affordability in terms of price of a monthly public transport ticket, share of transport-related carbon emissions, passenger satisfaction, average commute time to work, number of hours wasted in traffic per annum, public transport speed and number of road fatalities per inhabitant. 13

14 Appendix 3. Enabler metrics City connectivity metrics: breakdown of enablers Enabler indicators Weighting Unit of measure Score rationale Data source Wi-Fi speed 12.5% Broadband average download speed Mbps The higher the better Hyperoptic study/speed test Hotspots 7.5% Free hotspots per capita The higher the better Hotspot locations Public Transport Share of journeys to work using green modes 10.0% % of journeys by public transport, walking and cycling The higher the better Eurostat urban audit Length of dedicated cycle paths/lau 5.0% Length of bicycle network - km/local Administrative Unit (LAU) The higher the better Eurostat urban audit Transit web apps 12.5% Real-Time Passenger Information (RTPI) app coverage e.g. Citymapper, Ally, Moovit RTPI apps. The more coverage Citymapper, Moovit, Ally App, Google Transit the better Urban mobility strategy 5.0% CIVITAS membership: Demonstration (co-financed by the EU) or network (self-financed) city + Cities that take part in EUROPEANMOBILITYWEEK. Point scored if city is a CIVITAS, EUROPEANMOBILITYWEEK CIVITAS member/emw host Infrastructure spend 7.5% Transport Infrastructure Investment and Maintenance Spending per capita The higher the better OECD Private Transport Electric vehicle chargers 2.5% Total available within a 10km radius of the city core The higher the better Open Charge Map Ride sharing 5.0% Membership of ride sharing schemes e.g. Uber The earlier joined the better Uber Car sharing 2.5% Membership of car sharing schemes e.g. Car2go, DriveNow, uberpool The more coverage the better DriveNow, Car2go, uberpool 70% 14

15 Appendix 4. Effect metrics City connectivity metrics: breakdown of effects Effect indicators Weighting Unit of measure Score rationale Data source Affordability 5.0% Cost of a combined monthly ticket (all modes of The lower the better Eurostat urban audit public transport) for 5-10 km in the central zone - EUR/GDP per capita Transport carbon emissions 2.5% % share carbon emissions related to transport The lower the better C40 Cities Climate Leadership Group Satisfaction with transport network 2.5% % share of Very Satisfied people surveyed The higher the better European Commission Awards 5.0% Winner/finalist of the CIVITAS/ European Mobility Week awards Number of times received the CIVITAS, EUROPEANMOBILITYWEEK better Public transport speed 2.5% Urban bus or tram speed (km/hour) The higher the better EMTA barometer Commute to work 5.0% Minutes The lower the better Urban Transport Fact Book Traffic congestion 2.5% Annual hours wasted in traffic The lower the better INRIX Safety and Security 5.0% People killed in road accidents per capita The lower the better Eurostat urban audit 30% 15

16 Appendix 5: Density categories City density classification Country City Density (LAU population/lau)* Density category Spain Barcelona 16,316 High France Paris 8,800 High Italy Naples 8,434 High Denmark Copenhagen 7,664 High Belgium Brussels 7,279 High Italy Milan 7,273 High Portugal Lisbon 6,172 High Spain Valencia 5,841 High Spain Madrid 5,225 High UK London 5,177 High Spain Sevilla 4,930 Medium Netherlands Amsterdam 4,817 Medium Sweden Stockholm 4,596 Medium Germany Munich 4,531 Medium Switzerland Zurich 4,377 Medium Austria Vienna 4,196 Medium UK Birmingham 4,066 Medium Germany Berlin 3,837 Medium UK Glasgow 3,405 Medium Netherlands Utrecht 3,401 Medium UK Oxford 3,370 Medium Poland Warsaw 3,334 Medium Netherlands Rotterdam 2,951 Medium Germany Stuttgart 2,914 Medium Germany Frankfurt 2,824 Medium Germany Düsseldorf 2,754 Medium Italy Bologna 2,730 Medium Germany Nuremberg 2,677 Medium France Lyon 2,604 Medium Germany Cologne 2,552 Medium Germany Hannover 2,539 Medium Czech Republic Prague 2,513 Medium Belgium Antwerp 2,505 Medium Netherlands Eindhoven 2,491 Medium Germany Hamburg 2,312 Medium Italy Rome 2,190 Medium UK Manchester 2,123 Medium France Bordeaux 2,078 Medium Germany Dortmund 2,052 Medium Germany Mannheim 2,047 Medium 16

17 City density classification (continued) Country City Density (LAU population/lau)* Density category Sweden Malmo 1,947 Low Luxembourg Luxembourg 1,940 Low France Lille 1,895 Low UK Bristol 1,848 Low UK Edinburgh 1,838 Low Germany Leipzig 1,788 Low France Marseille 1,729 Low Germany Bremen 1,686 Low Germany Dresden 1,617 Low France Toulouse 1,583 Low UK Leeds 1,377 Low Norway Oslo 1,374 Low Ireland Dublin 1,370 Low UK Aberdeen 1,216 Low France Nantes 1,183 Low France Nice 1,175 Low Sweden Gothenburg 1,155 Low France Montpellier 1,029 Low Finland Helsinki 856 Low Netherlands The Hague 826 Low Denmark Århus 682 Low UK Guildford 518 Low Finland Espoo 494 Low UK Cambridge 309 Low * Local Administrative Unit (LAU) as defined by Eurostat. A city is an LAU when the majority of the population lives in an urban centre of at least inhabitants. Source: Eurostat 2016, M&G Real Estate. 17

18 Appendix 6: Connectivity scores vs yields Total Connectivity Score Yield (%, end 2015) Paris Berlin Stuttgart Zurich Stockholm Amsterdam Munich London Bremen Luxembourg Hamburg Lyon Vienna Malmo Barcelona Dublin Rotterdam Frankfurt Copenhagen Gothenburg Helsinki Nantes Lisbon Warsaw Toulouse Hannover Utrecht Dresden Madrid Bologna Milan Lille Aberdeen Cambridge Oslo Brussels Espoo Düsseldorf Leipzig Rome Mannheim Bristol

19 Total Connectivity Score Yield (%, end 2015) Dortmund Manchester Marseille Bordeaux Edinburgh Guildford Cologne The Hague Birmingham Antwerp Prague Glasgow Naples Leeds Montpellier Nuremberg Source: M&G Real Estate, December 2016, PMA March

20 For more information Vanessa Muscarà Senior Research Analyst +44 (0) Richard Gwilliam Head of Property Research +44 (0) Christopher Andrews, CFA Head of Client Relationships and Marketing, Real Estate +(65) Lucy Williams Director, Institutional Business UK and Europe, Real Estate +44 (0) Stefan Cornelissen Director of Institutional Business Benelux, Nordics and Switzerland +31 (0) For Investment Professionals only. This document is for investment professionals only and should not be passed to anyone else as further distribution might be restricted or illegal in certain jurisdictions. The distribution of this document does not constitute an offer or solicitation. Past performance is not a guide to future performance. The value of investments can fall as well as rise. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and you should ensure you understand the risk profile of the products or services you plan to purchase. This document is issued by M&G Investment Management Limited (except if noted otherwise below). The services and products provided by M&G Investment Management Limited are available only to investors who come within the category of the Professional Client as defined in the Financial Conduct Authority s Handbook. They are not available to individual investors, who should not rely on this communication. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although M&G does not accept liability for the accuracy of the contents. M&G does not offer investment advice or make recommendations regarding investments. Opinions are subject to change without notice. M&G Investments and M&G Real Estate are business names of M&G Investment Management Limited and are used by other companies within the Prudential Group. M&G Investment Management Limited is registered in England and Wales under numbers with its registered office at Laurence Pountney Hill, London EC4R 0HH. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. M&G Real Estate Limited is registered in England and Wales under number with its registered office at Laurence Pountney Hill, London EC4R 0HH. M&G Real Estate Limited forms part of the M&G Group of companies. M&G Investment Management Limited and M&G Real Estate Limited are indirect subsidiaries of Prudential plc of the United Kingdom. Prudential plc and its affiliated companies constitute one of the world s leading financial services groups and is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America. DEC 16 / W