SPAIN COMMERCIAL REAL ESTATE. CBRE Spain. 21 st October, 2014 CLIENT LOGO. CB Richard Ellis Page 1

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1 SPAIN COMMERCIAL REAL ESTATE CBRE Spain 21 st October, 2014 CB Richard Ellis Page 1 CLIENT LOGO

2 Southern Europe Investment Briefing PATRICIO PALOMAR MURILLO Head of Research & Investment Strategy T F patricio.palomar@cbre.com

3 Madrid office market CBRE Spain

4 Madrid: KPIs 2014 Q3 Zone Stock (sqm) Take-up (sqm) Availability (% stock) New Supply* (sqm) Max. Rent ( / sqm/month) CBD 3,532,415 31, % 19, Secondary Centre 2,499,000 8, % 18, A-1 Motorway 2,385,614 13, % A-2 Motorway 2,378,605 8, % 25,383 14,25 A-6 Motorway 1,137,000 1, % Periphery 545, % 0 7,75 Madrid Total 12,477,818 65,157 17,42% *New supply in development p. 4

5 Take Up & Vacancy Rate 400 Take-up, Thousand sqm Vacancy rate, % stock 20% % % 14% % % 150 8% 100 6% 4% 50 2% % p. 5

6 Madrid Lisbon Brussels Barcelona Amsterdam Prague Moscow Paris Vienna Rome London WE Frankfurt Milan London City Warsaw Dublin Lots of variation in the take up across the region Annual take-up to Q compared to 10-year average 30,0 % difference from 10 yr average 20,0 10,0 0,0-10,0-20,0-30,0-40,0-50,0 p. 6

7 Madrid Take - Up (by number of transactions) Transactions inside and outside the M-30 ring road Thousand sqm Out of M-30 Ringroad Inside M-30 Ringroad 49% 45% 48% 59% % % 58% 47% % 53% 52% 56% 64% 56% p. 7

8 New Supply Pipeline Thousand sqm 800,00 Not started Under construction Completed 600,00 400,00 % Committed Space 0% 52% 200,00 0, p. 8

9 EMEA Prime Office Rent Cycle: Recovery Progress As of Q Source: CBRE EMEA p. 9

10 Prime Rent Rental evolution 45 /sqm/month Y-o-Y variation 60% 40 50% 35 40% 30% 30 20% 25 10% 20 0% 15-10% 10-20% -30% 5-40% 0-50% p. 10

11 Sq m Grade A space expected to drain with lack of development Assuming current market condition unchanged, Grade A availability will be absorbed by the end of 2017 Vacant Space Grade A Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q3 17 p. 11

12 Investment market COMMERCIAL REAL ESTATE Visuel p. 12

13 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q CRE Investment Volumes in CEE vs. Southern European Economies In nominal figures million CEE Southern Europe Source: CBRE, EMEA p. 13

14 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q CRE Investment Volumes in Southern Europe Spain million Italy Spain Portugal 4Q average 0 Source: CBRE, EMEA p. 14

15 European Capital Value Cycle L London L London P Paris F Frankfurt L London A Athens F Frankfurt P Paris A Athens M Madrid P Paris F Frankfurt M Madrid Core Assets A Athens M Madrid Core+ Assets Secondary Assets Source: CBRE EMEA p. 15

16 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Madrid: Prime yields evolution 11 Industrial Offices High Street Shopping Centres p. 16

17 Key Market indicators really far to the average, in the best times For prime office assets in Barcelona from Average Current Capital Values Rents Yields Euros/sqm 30 Euros/sqm/month 8% % % % % % p. 17

18 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Offices - Capital Values /sqm Barcelona Madrid Europe Europe: France, Germany, Italy, Nederlands, Spain, UK (average) p. 18

19 Yields Bond markets to the fore in 2011 Shopping Centres MAD Offices MAD German 10 yr bonds Spanish 10 yr bonds 8% 7% 6% 5% 4% 3% 2% 1% 0% Source: CBRE Real Estate & Bloomberg p. 19

20 Up to Q3 in 2012, 2013 & 2014 Total closed deals; Spain Doubling year on year 250 # Transactions Q Q Q p. 20

21 Up to Q3 in 2012, 2013 & 2014 Total Investment volume; Spain Doubling year on year million Q Q Q p. 21

22 Up to Q3 in 2012, 2013 & 2014 Average ticket; Spain Not a clear trend 50 million Q Q Q p. 22

23 Up to Q3 in 2012, 2013 & 2014 Total Investment volume; Spain The share per sectors (% of total) million Offices Retail Industrial Others MM 1,455 MM p ,574 MM Q Q Q3 2014

24 Spain: Historical CRE Turnover Investor demand is now reflected in investment volumes Millions Offices Retail Industrial & Logistics Other Pipeline Q p. 24

25 Up to Q Total Investment volume; Spain Spain Investment by Sector (%) 16% Office 6% 37% Retail Industrial 41% Other p. 25

26 Q Spain: CROSS-BRODER CRE Investment Share per capital origin Capital Flows 56% 44% Spain Foreigners p. 26

27 Spain up to Q3 2014: Cross-Regional CRE Investment 2,964 out of 6,574 million came from over seas until Q Europe 1,132 million North America 988 million Middle East 138 million Asia-Pacific 513 million North LatAm 130 million South LatAm 63 million p. 27

28 Spain: CROSS-EUROPEAN CRE Investment 39% of foreign capital came from other European countries when it was 28% in 2013 UK 233 million Netherlands 155 Germany 55 million million France Switzerland 584million 201 million p. 28

29 Q Spain: CROSS-BRODER CRE Investment Share per country of the 2,964 million 8% 2% 3% 3% USA China UK Canada 7% 1% 5% 42% Qatar Mexico Singapore 6% Netherlands Switzerland 6% 6% 11% India Brazil Germany p. 29

30 Q vs Q Total Investment volume; Spain Spain Investment by Sector (%) Q Total Investment volume Q Total Investment volume 22% 16% 43% 6% 37% 7% 28% 41% p. 30

31 Q Spain: CROSS-BRODER CRE Investment Share per country of the 2,964 million 7% 1% 1% 3% 39% 8% 0% Corporate 6% 2% 7% 2% 24% Developer Family Office Hotel Company Institutional Fund SOCIMI Insurance Company Investment Club Other Collective Vehicle Private investor Property Company Public Administration p. 31

32 We had not only single assets transactions but portfolio disposals as well In all the sectors and some of the projects were pan-regionals p. 32

33 Financial Times Europe s property IPOs at eightyear high - Tuesday 15 th July 2014 p. 33

34 The new tax efficient vehicles established in Spain The Fiscal Impact SOCIMI Capitalization , p. 34

35 Conclusions Visuel p. 35

36 Conclusions The perception of Spain as an investment destination has changed dramatically, based on: Some evidence of economic improvement, and Consensus about near term stabilization and growth. The disconnect between risk and potential return has been strongly reduced. Core continues to be narrowly defined. Investors are still able to realize outsized returns for the risk assumed. These potential arbitrage opportunities will decrease as the perception of Spain continues to improve. Investors with sufficient investment capacity and a willingness to assume risk can expect double-digit returns. p. 36

37 Where is the opportunity? Bigger ticket assets (debt close to maturity) Good asset/location with capex requirement Good companies over leveraged that go for sale and lease Public sector sale and lease NPL s (Campeon Project example) Supply segmentation is key to separate the good from the bad Retail (regions with moratoria) Costa del sol, resort type with track record Good locations not so good asset or vacancy Student housing and health sector Logistic portfolio lease (>8,5% net yield) p. 37

38 Why invest now? Spanish cycle is very volatile Main structural reforms are being implemented Banks are not lending just refinancing Prices close to replacement values Rentals levels have already adjusted heavily Good quality stock is not in oversupply Smart money coming in and legacy situations being addressed p. 38

39 DISCLAIMER Global Research and Consulting This presentation was prepared by the CBRE Spain Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. Disclaimer CBRE Spain confirms that information contained herein, including projections, has been obtained from sources believed Visuel to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. p. 39

40 THANK YOU FOR YOUR TIME CBRE Page st October, 2014

41 For more information regarding this presentation please contact: PATRICIO PALOMAR MURILLO Head of Research & Investment Strategy T F patricio.palomar@cbre.com