LASALLE E-REGI INDEX - EUROPEAN REGIONAL ECONOMIC GROWTH INDEX - BUSINESS IMMO
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
LaSalle > E-REGI index EUROPEAN REGIONAL ECONOMIC GROWTH INDEX
LaSalle European Regional
Economic Growth Index 2018
October 2018
Launched in 2000 Europe-wide Strong relationship
2018 is the 19th edition coverage with real estate
of the LaSalle E-REGI 32 countries Framework for real
Index 295 European regions estate strategy
Shows relative economic Ranking of 100 cities Proxy for occupier
performance compared demand
to the European average
LaSalle E-REGI Index 2018
Battle of the Giants
LaSalle Investment Management LaSalle E-REGI Index 2018 3
LaSalle E-REGI Index 2018: Battle of the Giants London retains
LaSalle’s annual European Regional Economic Growth Index (E-REGI) identifies the
European regions and cities with the best economic growth prospects. As such, the index
approximates the relative strength of future occupier demand for real estate1 and will
prove valuable as the basis of any real estate investment strategy.
1st position
for the 10th time in the history
Our analysis includes nearly 300 regions across 32 European countries, covering a total
population of more than 745 million. This report focuses on Europe’s 100 major city- of the E-REGI Index
regions (regions including cities with more than 500,000 inhabitants and all national
capitals), which are ranked based on their latest score.
The E-REGI Index attaches a score to each European region based on its medium-term
economic growth prospects, its level of wealth and the quality of the business
environment, relative to the European average (see technical note on p.28 for more
Paris comes a
close 2nd
detail on our methodology).
The top of the 2018 index shows relative stability compared to last year. In fact, the top
four is entirely unchanged. London retains top spot for the tenth time in the history of the
E-REGI Index. London’s outlook remains vulnerable to uncertainty around the UK’s future
relationship with the EU, but shows significant resilience compared to the rest of the UK. for a 2nd consecutive
Paris comes a close second for a second consecutive year, displaying its highest score
ever. The French capital leads the LaSalle European Human Capital Index (LEHCI) which
year
drives part of the E-REGI Index score and even increased its score on this metric.
Stockholm remains in 3rd position, boosted by its high level of wealth. Despite the
emerging economic crisis in Turkey, the size (it’s the largest city covered by the index with
16.4 million inhabitants) and prospects of Istanbul remain impressive enough to retain
Stockholm remains in
3rd position
the city in fourth position.
The correlation between the E-REGI scores of the 33 largest office markets in Europe and office
,
1
take-up in these markets in the following three years has averaged 62% over the last 15 years,
showing robust relationship with occupier demand.
boosted by its high level of wealth
LaSalle Investment Management LaSalle E-REGI Index 2018 4
5 cities responsible for the lion’s share of real estate The map on the next page shows the dominance of north-western European cities at the
investment activity top of the index this year. Apart from Istanbul, Madrid is the only city in the top 15 located
south of Paris. The recovery remains tangible in the Spanish capital, with strong
employment growth improving its E-REGI score this year. The top 15 only shows one new
entrant: Helsinki in rank 14, which replaces Lyon which has dropped slightly (from rank
1. London 15) to rank 19.
2. Paris This year, the analysis presented in this report focuses on the cities in Europe’s three
largest countries: Germany, France, and the United Kingdom. Not only do London and
Paris top the table, three German cities are included in the top 15: Munich in fifth
3. Stockholm
position, Stuttgart in eighth position and Berlin in rank 15. This highlights the difference
between the polycentric set-up of Germany compared to the much more centralised
4. Istanbul countries of the UK and France. The score of the three German cities combined reveals
an aggregate score well above either London or Paris individually (see figure on the left).
5. Munich These five cities in Germany, France, and the United Kingdom are of great importance at
the top of the index but show an even greater dominance when it comes to the real estate
6. Dublin investment market. As the figure also shows, that together they represent 66% of all
investment volumes transacted in the top 15 cities over the past 2.5 years.
7. Luxembourg
The analysis presented in the rest of this report shows that Germany, France and the UK
8. Stuttgart go head-to-head in terms of city-strengths. Of the three Giants, Germany comes out top,
thanks to the country’s strong business environment score. However, France comes a
9. Oslo close second. The country scores more poorly on the business environment metric, but
an improving economic outlook, bolstered by a resurgence in job growth, has boosted
10. Copenhagen-Malmö its cities up the ranking. While London remains the city with the strongest prospects in
Europe today, Paris is becoming an ever-closer rival. Brexit uncertainty has started to
create job opportunities in Paris, while it has slowed the pace of employment growth in
11. Zürich
London. Meanwhile, the gap between London and the second-strongest city in the UK
(this year: Edinburgh in place 44) has not been larger over the 19-year history of our
12. Madrid index. Despite their strong position in terms of Human Capital, the outlook of UK cities
is negatively affected until the uncertainty around the future relationship between the
13. Brussels UK and the EU is resolved.
14. Helsinki The next three sections address the strengths and weaknesses for the cities in each of
the three Giants separately. A number of city-level strategies are also presented to show
15. Berlin how the themes put forward by the results from the E-REGI Index can be translated to
outperforming investment opportunities. At the end of this report we return to the broader
picture described by this year’s results, summarising trends seen in the other cities
Source: LaSalle (08/18)
covered by the index.
LaSalle Investment Management LaSalle E-REGI Index 2018 5
E-REGI 2018 Scores
Very Strong 1.19 - 2.37
Strong 1.08 - 1.19
Good Medium 0.97 - 1.07
Poor Medium 0.87 - 0.97
Weak 0.80 - 0.87
Very Weak 0.28 - 0.80 14. Helsinki
No data 9. Oslo
3. Stockholm
Coverage Cities
Top 15 Cities
10. Copenhagen-Malmö
6.Dublin
15. Berlin
13. Brussels
1. London
7. Luxembourg
8. Stuttgart
2. Paris
5. Munich
11. Zürich
4. Istanbul
12. Madrid
LaSalle Investment Management LaSalle E-REGI Index 2018 6
LaSalle E-REGI Index UK
UK: Principal strengths come from London retains its
Human Capital Scores, while Brexit
casts a shadow
top position
in the overall ranking thanks to its large size
At the start of the autumn 2018, the future relationship between the UK and the EU
remains undetermined despite the rapidly approaching Brexit date in March 2019.
and strong Human Capital score
Unsurprisingly this uncertainty has affected the UK cities in the 2018 E-REGI results:
GDP and employment growth forecasts have been scaled back and the business
environment score has fallen below the European average for the first time. London (1/-)
was able to maintain its top position in the overall ranking thanks to its large size and Last year, Bristol and Manchester were the
strong Human Capital score, emphasising the lasting importance of the UK’s capital. strongest cities in the UK after London but have
The business environment score is determined on a national level, primarily using Oxford now been overtaken by
Edinburgh
Economics’ data driven risk assessment on Sovereign Risk, Trade Credit Risk and
Political Stability. At present, the UK sits in the bottom quartile on the indicator of Political
Stability: reflecting the risk that the Brexit negotiations may result in a general election as
well as the already weakened position of the Conservative party in the UK government.
The implications of the decoupling process between the UK and EU on Trade Credit Risk
are currently only moderately reflected in the data, but could oscillate quickly. More
positively, risks around Sovereign Default remain very limited as the UK benefits from
setting its own monetary policy. Birmingham looks to benefit from an
In the period ahead, we expect uncertainty to remain elevated and the news flow to
vacillate as key events transpire. However, the bigger picture is that the prospect of a enhanced transport
network
second referendum should help maintain discipline amongst Eurosceptic MPs adding
pressure on them to push through a deal, rather than face the prospect of a much more
disruptive no-deal scenario or a general election. and relocation of some major
The deterioration in national-level GDP growth expectations has been reflected in weaker financial service employers
GDP scores in the majority of UK cities. Leeds (76/-10) and Liverpool (78/-2) saw the
most notable decrease in GDP rankings, tumbling by 23 and 12 positions respectively
compared to last year. Last year, Bristol (49/-20) and Manchester (48/-5) were the
strongest cities in the UK after London, but as both cities saw significant declines in their
GDP scores, they have now been overtaken by Edinburgh which is the second strongest Despite record low unemployment rates and
UK city in the 2018 index, taking up place 44 in the overall ranking. Bristol saw the most
notable fall in the overall E-REGI ranking of all UK cities due to lower historic and forecast
slowing immigration, seven of the thirteen UK
GDP growth rates. cities saw their
employment
rankings improve
LaSalle Investment Management LaSalle E-REGI Index 2018 8All UK UK
citiescities benefit
have above from
average strong
Human Human
Capital scoresCapital scores
6.00 UK: Human Capital Scores (2018)
5.7
5.00
4.00
3.00
2.0 2.0
2.00
1.7 1.6
1.5 1.5 1.4 1.4
1.3 1.2 1.2 1.2
1.00
0.00 ol
d
le
by
st
l
gh
s
ff
w
to
m
n
er
el
ed
di
go
st
o
lfa
o
is
er
ur
a
st
ffi
ar
rp
nd
ca
Le
gh
Br
s
Be
e
-D
b
e
ve
C
la
Lo
ch
in
ew
Sh
in
m
G
Li
Ed
rm
an
a
N
gh
M
Bi
tin
ot
N
Axis crosses at score of 1 as this is the European average.
Axis crosses at score of 1 as this is the European average.
LaSalle Investment Management | LaSalle Research Seminar 2018 4
LaSalle Investment Management LaSalle E-REGI Index 2018 9In contrast, a stronger-than-expected year for service sector employment in 2017 the European average respectively. Going forward, these cities are also expected to
across the UK has helped employment scores. Despite record low unemployment rates become wealthier with higher projected GDP growth than population growth. That fits well
and slowing immigration, seven of the thirteen UK cities in the index saw their with the view that strong Human Capital also translates into healthy economic growth
employment rankings improve relative to 2017. Birmingham (45/+4) shows the most prospects over the medium-term. Conversely, Sheffield’s wealth score, the lowest in the
notable improvement, as the city looks to benefit from an enhanced transport network UK, is 16% lower than the European average, implying that expected economic growth
on the back of a new high-speed rail link to London (HS2), as well as the moves of looks set to be outpaced by population growth in the area.
some major financial service employers.
Most notably, HSBC has transplanted much of its back-office operations to Birmingham.
The Nottingham/Derby (61/+9) metro area also saw its overall ranking boosted by
healthy forecast growth in administrative and support jobs and professional & technical
and scientific positions. The same observation is true about Glasgow (69/+4). Cardiff
(65/+7) saw a strong improvement in its overall E-REGI position, largely thanks to an UK City Scores and Sub-Score Ranks
improved employment score which came broadly in line with the European average.
Based on component scores
Similarly, Edinburgh’s (44/+4) increase in the overall ranking was helped by a healthy 2018 2018
improvement in employment prospects, with important job gains expected in the City E-REGI E-REGI GDP Employment Human Wealth
administrative and support sector as well as among professional, scientific and Score Rank Rank Rank Capital Rank
technical activities. By contrast, partially reflecting comparatively poorer transport Rank
infrastructure, Leeds is expected to see a significant contraction in public and financial
sector employment over the next five years, causing the city to fall 22 places in the Edinburgh 1.2 44 66 69 15 37
employment ranking. Birmingham 1.2 45 43 35 31 60
One of the UK’s principal strengths is its exposure to factors that are tied to long-term Manchester 1.1 48 52 57 29 45
drivers of productivity as measured through our Human Capital scores. In fact, all UK
cities score above the European average in terms of human capital, and the lowest Bristol 1.1 49 77 79 16 33
ranking UK city on this metric (Belfast (83/+3) sits towards the middle of the pack,
Nottingham
in 57th place on the Human Capital ranking. After London, Edinburgh achieves the 1.1 61 62 50 41 62
-Derby
second highest Human Capital score, reflecting the city’s close ties to higher education
institutions. Bristol also continues to enjoy a Human Capital score that is double the Cardiff 1.0 65 80 61 44 50
European average. Sheffield (87/-2) and Newcastle (84/-) were the most notable
improvers in terms of Human Capital rankings in the UK, rising eight and five positions Glasgow 1.0 69 82 76 36 54
respectively. These two cities enjoy strong agglomeration effects through high density Leeds 1.0 76 84 80 55 59
and have a high representation of tertiary education graduates within their working-age
population. Nevertheless, a stronger Human Capital score was not enough to Liverpool 0.9 78 92 87 37 67
significantly alter their standing in the overall E-REGI ranking compared to last year. Belfast 0.9 83 86 82 57 68
The vast majority of the UK cities have wealth scores close to the European average.
Newcastle 0.9 84 89 86 52 66
There are four notable exceptions with wealth scores well-above the European average:
London, Bristol and Edinburgh which display wealth scores 62%, 22% and 13% above Sheffield 0.9 87 94 84 56 74
LaSalle Investment Management LaSalle E-REGI Index 2018 10South East London: Low-rise retail clusters provide options for transformation
South East London: Low-rise retail clusters provide options for transformation
London’s population continues
London’s to increase
population continues despite Brexit
to increase uncertainties
despite and demand
Brexit uncertainties for
and demand for
affordable and mid-price housing
affordable remains
and mid-price strong.
housing The map
remains shows
strong. housing
The map shows density of 200m
housing density of 200m
by 200m squares by 200m squares
together together
with nearly 200with nearly
retail 200 retail warehouse
warehouse location Greater
locations across across Greater
London.
A number of retail London. A number
warehouses of retailEast
in South warehouses
LondoninareSouth East London
located are located
in otherwise veryindense
otherwise
partvery
dense part of the city. As a lower-density, lower-value use compared to urban residential,
of the city. As a lower-density, lower-value use compared to urban residential, these retail
these retail warehouses make interesting investment opportunities as they provide an
warehouses makeincome interesting
streaminvestment opportunities
at point of entry as theyopportunity
and a development provide anlaterincome
in the stream at
investment
point of entry and period.
a development opportunity later in the investment period.
Legend
Housing density
High
Low
Retail warehousing
LaSalle Investment Management | LaSalle Research Seminar 2018 6
LaSalle Investment Management LaSalle E-REGI Index 2018 11LaSalle E-REGI Index France
France: Strong improvement in Employment Over the last three years Toulouse
Scores, with labour market reforms providing has experienced
further upside stronger GDP
growth
During 2017, Emmanuel Macron’s first year in power as the French President, France
recorded the strongest economic growth since 2007. Growth in the first half of 2018 has
been more modest and recent strikes and protests opposing the President’s planned
reform agenda have certainly contributed to the slowdown. Nevertheless, this year’s
results re-emphasise the strength of Paris (2/-) in a European context, as the city than any other city in France
displays its highest E-REGI score in the 19-year history of the index. The French capital
leads the LaSalle European Human Capital Index (LEHCI).
France’s Business Environment score is marginally higher than the European average In terms of Human Capital, Paris ranks
1st for the quality
but has weakened compared to last year, holding back all French cities in their
progression in the 2018 E-REGI index. Despite France’s public finances improving
recently, Oxford Economics sees the Sovereign Credit risk in France as the highest of the
of its universities
three giants, mainly due to France’s higher budget deficit (as a % of GDP) which could
prove problematic in an environment of rising interest rates. France also underperforms
relative to the European average on Political Stability. Macron may still be firmly in the
driver’s seat for another four years, but he faces an upward struggle trying to implement and patent production, 2nd in terms of venture
much needed reforms to the labour market and welfare system. However, the expectation
is that the President will succeed in the implementation of the Government’s structural capital and 3rd for population density
reforms and these present significant upside risks to the medium-term growth outlook.
Service sector
The five-year outlook for French economic growth has strengthened over the last year,
which has been reflected in stronger GDP scores in the majority (8 out of 10) of French
cities in the E-REGI index. Over the last three years Toulouse (32/-4) has experienced
employment
stronger GDP growth than any other city in France. This has been supported by strong
population growth, second only to Bordeaux (51/-4), with people predominantly coming
from other regions in France, in particular from the Paris region. Marseille-Nice (43/-2)
benefits from a stronger GDP outlook compared to last year. Lille (70/-5) is also a notable
improver in terms of GDP score. growth forecasts for all French
cities have been upgraded
40,000
additional IT jobs
are forecast in Paris by 2022,
the second-highest after London
LaSalle Investment Management LaSalle E-REGI Index 2018 13All French cities have improved their employment score
France: Change in Employment Scores (2018)
0.12
0.10
0.08
0.06
0.04
0.02
0.00
on
re
ris
se
ux
s
lle
rg
e
te
e
av
ic
Ly
Li
Pa
ea
ou
u
us
an
bo
N
H
ul
rd
ho
s-
N
s
e
To
Bo
ille
ra
ul
-L
l-M
St
en
se
ou
se
ar
M
Ba
R
LaSalle Investment Management LaSalle E-REGI Index 2018 14The unemployment rate in France peaked in 2015 and the labour market has been France City Scores and Sub-Score Ranks
recovering since as the economic recovery has taken hold. The recovery in the French
labour market is benefiting all French cities in this year’s E-REGI results through Based on component scores
higher Employment scores. Robust service-sector employment of 3.5% over the last 2018 2018
three years (equivalent to around 670,000 jobs) is partially attributable to a cyclical City E-REGI E-REGI GDP Employment Human Wealth
Score Rank Rank Rank Capital Rank
recovery, but also the result of government measures under former President
Rank
Hollande, which included fiscal incentives for companies to hire low-to-medium-paid
employees. President Macron’s reforms aim to lower unemployment further and ease Paris 2.3 2 10 7 1 6
labour regulations to create a more attractive and flexible French labour market. As
such, service sector employment growth forecasts for all French cities have been Lyon 1.4 19 35 11 12 39
upgraded compared to last year. Toulouse 1.2 32 55 21 19 48
Of the French cities, Paris sees the strongest improvement in its Employment score.
Basel-
All categories of service sector employment in Paris are forecast to expand over the 1.2 36 87 68 13 18
Mulhouse
next five years, but particularly employment in the professional & administrative and IT
sectors. By 2022, Oxford Economics forecasts an additional 40,000 IT jobs in Paris, Marseilles
the second-highest growth in Europe after London. SoPi (South of Pigalle) in the 9th 1.2 43 44 28 43 46
-Nice
arrondissement has seen the greatest concentration of internet start-ups in recent
years and has developed into a vibrant area to work, live and play. The Employment Nantes 1.1 50 53 19 73 51
scores of Nantes (50/-5) and Rouen-Le Havre (75/-1) also improved strongly due to Bordeaux 1.1 51 51 22 67 56
a better growth outlook than previously, although their overall scores were held back
by other components. Lille 1.0 70 76 42 77 64
Strasbourg 1.0 74 96 64 64 41
Rouen-Le
1.0 75 83 62 83 58
Havre
LaSalle Investment Management LaSalle E-REGI Index 2018 15Paris made further progress in terms of its Human Capital score, which is leading
in Europe. Within the Human Capital score, Paris ranks first for the quality of its
universities and patent production, second in terms of venture capital and third for
Paris population density. The establishment of hubs such as Station F in the French capital, the
largest start-up incubator in the world located in the 13th arrondissement of Paris, creates
82%
an ecosystem that will drive technological innovation. Further ahead, the Grand Paris
project which involves €26 billion of investment to develop the public transport
above the European infrastructure of Paris, will provide a framework to link the region’s main economic centres
average and 6th highest by rank and support long-term growth. Earlier this year, the French government also approved
five new high-speed TGV train lines to improve connectivity between France’s regions by
2023. Lyon (19/-4) also has a strong Human Capital score in a European context, scoring
strongly on its quantity and quality of universities and patent production. In Basel-
Mulhouse (36/-3) the chemical and pharmaceutical industry drives R&D investment and
patent production, while Toulouse’s strong performance in terms of R&D investment is
linked to the presence of the Airbus group.
At a national level, GDP is growing faster than population meaning that wealth is generally
Basel-Mulhouse increasing. However, as GDP per capita increased less than the European average, the
49%
Wealth scores for the French cities are marginally lower than last year. Within France, Paris
stands out in terms of wealth, and also fares strongly on a European basis (82% above the
above the European average and 6th highest by rank). The Paris region accounts for 18% of the
French population but generates one third of national wealth. Basel-Mulhouse also displays
European average
relatively high wealth (49% above the European average), while Lyon and Strasbourg
(74/-14) are more than 10% wealthier compared to the European average. The remaining
six French cities in the index display wealth around the European average, with the
exception of Lille, which sits 5% below the European average.
Lyon and Strasbourg
more than10% wealthier
compared to the European average
The five-year outlook for French economic
growth has strengthened over the last year
LaSalle Investment Management LaSalle E-REGI Index 2018 16SoPi (South of Pigalle): Paris Edge of CBD location preferred by start-ups
SoPi (South of Pigalle): Paris Edge of CBD location preferred by start-ups
Paris has a strong presence
Paris has aofstrong
IT companies,
presence of IT both of the traditional
companies, kind as well
both of the traditional kind as techas tech
as well
start-ups such
start-ups such as Blablacar (car as Blablacar
sharing) and(carCriteo
sharing) and Criteo (personalized
(personalized online advertising).
online advertising). The map
shows TMT leasing The map showscategorised
transactions TMT leasing transactions
by type of categorised
business. by Thetype of dots
red business. The red
of IT/Software
dots of IT/Software companies are most numerous and can be found throughout Paris
companies are mostand numerous and can be found throughout Paris and surrounding areas. The
surrounding areas. The green dots, displaying internet service companies, are less
green dots, displaying internet service companies,
plentiful and concentrated are 2nd
in the 9th and lessarrondissements.
plentiful and concentrated
The area of thein the 9th
9th,
and 2nd arrondissements.
now dubbedThe“SoPi”
area isofathe 9th,edge
typical nowofdubbed “SoPi”
CBD location is a typical
in strong demandedge of CBD
by smaller office
tenants by
location in strong demand duesmaller
to its central location,
office mix due
tenants of historical buildingslocation,
to its central and amenities.
mix ofInvestment
historical
in this area suits core investors looking for upside through rental growth.
buildings and amenities. Investment in this area suits core investors looking for upside through
rental growth.
Legend
Paris TMT Letting
Transactions
IT/Software
Media
Internet Service
Hardware & Equipment
Telecommunications
LaSalle Investment Management | LaSalle Research Seminar 2018 9
LaSalle Investment Management LaSalle E-REGI Index 2018 17LaSalle E-REGI Index
Germany
LaSalle Investment Management LaSalle E-REGI Index 2018 18Germany: Country maintains dominance in
E-REGI Index but shows a more mixed picture Germany comes
on city-level
In the second half of 2018 Germany continues to drive growth in Europe.
out second
The country benefits from a secure business environment in the European context. highest on the business environment measure
In the 2018 E-REGI index Germany comes out second-highest on the business
environment measure. Germany receives the strongest score possible on Trade
Credit risk and outperforms all other countries included in the index with regards
to Sovereign risk. However, due to external trade disputes and internal political 250,000 people are
instability, Germany’s position as Europe’s leader is slowly eroding. The recent expected to be added to the
refugee discussions between the leading German parties CDU and CSU highlighted
the weakness of Merkel’s fourth term coalition. On a relative basis, however,
Germany’s business environment score remains strong and is unlikely
to change materially.
Munich region,
which is almost as much as in Paris, a city
with a population nearly 3x the size.
Berlin was ranked
In the 2018 E-REGI Index Germany comes out second
highest on the business environment measure number 73
in the overall 2003 E-REGI Index and has
since moved up to rank 15.
The gap between Munich,
the wealthiest
German city
and Leipzig-Dresden, the least wealthy German city, is 37%,
which is relatively low in an international context.
LaSalle Investment Management LaSalle E-REGI Index 2018 19Population growth explains under or above average GDP scores
GDP Score (2018) & Population growth forecast (2018-22)
Axis crosses at score of 1 as this is the European average.
LaSalle Investment Management LaSalle E-REGI Index 2018 20Germany is the largest country by GDP and population in the European Union. Over the Germany City Scores and Sub-Score Ranks
last three years, the economy showed solid economic growth and the strong performance
of the German A-cities in the 2018 E-REGI Index reflects that this is expected to continue. Based on component scores
Munich (5/+2) leads the GDP ranks. Compared to 2017, Munich has improved its GDP 2018 2018
score. Manufacturing (especially the car industry), IT and Real Estate Activity are City E-REGI E-REGI GDP Employment Human Wealth
Score Rank Rank Rank Capital Rank
important drivers to this growth. There is a strong connection between above or below
Rank
average GDP scores and above and below average population growth forecasts. The
Munich region is expected to see strong population growth over the next 5 years and Munich 1.8 5 23 15 4 7
in absolute terms, more than 250,000 people are expected to be added to the region –
nearly as much as expected in Paris, a city with a population nearly three times the size. Stuttgart 1.6 8 31 56 5 12
As a result, Munich’s GDP component ranks at place 23 this year. Bremen (47/+5) and Berlin 1.4 15 39 27 10 40
Cologne-Bonn (28/+7) saw a relatively strong increase in their GDP score compared
to 2017. Bremen increased its GDP rank by +6 places, Cologne-Bonn even climbed Frankfurt 1.4 18 48 43 24 15
24 ranks. Bremen’s improvement is driven by a high historical GDP growth. Its port Cologne
facilities and the proximity to the North Sea, have turned the region’s economy into an 1.3 28 60 33 32 22
-Bonn
attractive mixture of shipping, foreign trade and industry. In contrast, Düsseldorf (34/-4)
slipped 16 ranks in terms of GDP score this year, as both historical and forecast GDP Mannheim 29 68
1.3 54 26 21
growth are projected below the German average. Düsseldorf’s population forecast is only -Karlsruhe
marginally positive, illustrating the relationship between economic and population growth
Hamburg 1.3 30 56 41 48 23
in a negative sense.
Nuremburg 1.2 31 65 59 35 24
The German cities do less well in terms of employment scores, particularly if compared to
French cities. An important reason for this weaker performance is a lack of labour supply Düsseldorf 1.2 34 72 58 34 27
since unemployment rates in most of the German cities are in the low single figures.
Berlin (15/-2) stands out positively with a strong employment score in a German context. Bremen 1.1 47 59 66 74 28
In our longitudinal E-REGI analysis2 Berlin is mentioned as the archetypical “Structural Leipzig
Mover”. The city was ranked 73 in the 2003 E-REGI Index and reached its highest rank 1.1 53 70 83 49 55
-Dresden
last year at number 13, below Munich and Stuttgart, but ahead of Frankfurt. The reason
underlying this positive trend is a combination of an increasing GDP score, employment Hannover 1.1 54 88 75 60 29
score and the introduction of the Human Capital score in 2016. Over the years, Berlin has Ruhr 1.1 60 85 81 66 38
become increasingly attractive as a start-up location, but has recently transformed itself
into the tech capital of Europe. Service sector employment growth in Berlin is relatively Bielefeld 1.0 67 95 77 81 31
strongly driven by the tech sector with 17% of new jobs expected in IT. Hamburg (30/+1) Saarland 0.9 80 97 88 88 34
saw a similar trend: based on strong job growth in the IT sector, it increased 5 places in
the employment rank. In terms of number of jobs, professional, scientific & technical
activities make the greatest positive contribution to service sector employment growth.
Nuremberg (31/+8) stands out in this regard. It increased its employment rank by +11
places, due to strong growth in the sector.
First published in 2015, subsequently revisited in 2017.
2
LaSalle Investment Management LaSalle E-REGI Index 2018 21As historically in the E-REGI Index, Stuttgart (8/+1) scores strongly on Human Capital.
The city ranks the second highest on this metric in Germany, in part due to the automotive
sector investing heavily in the future of the city. The city does relatively well in patent
production and R&D expenditure, thereby attracting skilled labour and making Stuttgart
even more competitive. Student cities do generally well in the Human Capital ranking.
Mannheim-Karlsruhe (29/-5) and Leipzig-Dresden (53/+1) are two examples that
benefit from the presence of strong universities. However, with little venture capital
investing in tech firms in these cities, it will be difficult to keep skilled labour after
graduation – limiting their Human Capital scores. A high share of business graduates
moves to Frankfurt (18/+1). The metropolitan region is known as the financial centre
of Germany. Thus, it has the third highest population with a tertiary education in the
country. This year, Frankfurt climbed by 4 ranks in the Human Capital component of
the E-REGI Index.
All German cities have Wealth scores above the European average. Even the four
weakest German cities in the E-REGI Index, Hannover (54/+2), Ruhr (60/-5),
Bielefeld (67/-4) and Saarland (80/-5) are relatively wealthy in a European context.
The gap between Munich, the wealthiest German city, and Leipzig-Dresden, the least
wealthy German city, is 37%, which is relatively low in an international context. However,
as current forecasts suggest that GDP per capita in the weaker German cities will rise
relatively less compared to their stronger scoring counterparts, this would imply that
even in Germany the wealth gap will be increasing.
All German cities have Wealth scores above the European average
LaSalle Investment Management LaSalle E-REGI Index 2018 22Munich East: Long term densification potential
Munich’s strongMunich
population growth
East: Long and
term influx of people
densification potential is changing the face of the city. The map
displays a combination of Munich’s
Munich’s strong populationpopulation
growth anddensity
influx of by bezirk,
people the city’s
is changing the urban fabric
face of the city.and
The large
residential developments
map displays(of more thanof200
a combination units)population
Munich’s currentlydensity
underbyconstruction. It urban
bezirk, the city’s shows that
fabric
central parts ofand
thelarge
city areresidential
already developments
very dense(ofand more than space
open 200 units)
is currently
scarce; under
large construction.
residential It
shows that central parts of the city are already very dense and open space is scarce; large
developments therefore take place in clusters at some distance from the centre. At close
residential developments therefore take place in clusters at some distance from the centre.
proximity to theAtcentre, few options
close proximity to the for large
centre, fewscale
optionstransformation remain. Munich
for large scale transformation remain.East is one of
Munich
these areas: due toisitsone
East good transport
of these connections
areas: due to its good and more
transport affordable
connections and prices, the areaprices,
more affordable
currently hosts the area currently
several hostsand
residential several residential developments
commercial and commercial developments
and is expectedand isto expected
develop to
develop areas
into a vibrant mix-use into a vibrant mix-use areas
over the10-15 over the10-15 years.
years.
Legend
Population Density 2015
> 162,500
- 100,000
< 42,500
Urban Fabric
Large residential
developments under
construction
LaSalle Investment Management | LaSalle Research Seminar 2018 12
LaSalle Investment Management LaSalle E-REGI Index 2018 23Berlin City West: Rebirth of the forgotten city centre
Berlin has seen anBerlin
influxCity
of tech
West:companies.
Rebirth of the The map shows
forgotten that the areas with the greatest
city centre
concentration of tech companies,
Berlin has seen anFriedrichshain, Prenzlauerberg,
influx of tech companies. The map showsKreuzberg and Medienspree
that the areas with the greatest
have recorded the concentration
highest office rental
of tech growth and
companies, are currently
Friedrichshain, seeing theKreuzberg
Prenzlauerberg, greatestandnumber of
office developments.Medienspree have recorded
The increasing statusthe
of highest
Berlin office rental
as “tech growth and
capital” are currently
is causing seeing the
tremendous
greatest number of office developments. The increasing status of Berlin as “tech capital” is
pressure on these areas with competition from high value uses such as residential and hotel,
causing tremendous pressure on these areas with competition from high value uses such as
making office use less viable.
residential andWe expect
hotel, makingthat thisuse
office toless
work in the
viable. Wefavour
expect of
thatthe
thiscommercial
to work in theareas
favour
in West Berlin, andofinthe
particular
commercialtheareas
areain around Bahnhof
West Berlin, and in Zoo. Occupier
particular the areaoutside the techZoo.
around Bahnhof sector
are attracted to theOccupier outside thelinks
great transport tech and
sector are attracted
great to the
amenities. greatprovides
This transport opportunities
links and great amenities.
both
This provides
for standing investments opportunities
as well both for standing
as refurbishments investments
that can benefit as wellthe
from as refurbishments
low vacancy that can
rates.
benefit from the low vacancy rates.
Legend
Prime office rental
growth (since Q1 13)
Rental growth
> 8%
- 6%
< 4%
IT companies that
received Venture Capital
Office developments
under construction
LaSalle Investment Management | LaSalle Research Seminar 2018 13
LaSalle Investment Management LaSalle E-REGI Index 2018 24Further results
LaSalle Investment Management LaSalle E-REGI Index 2018 25Further Results
• One of the largest improvers in this year’s index is Warsaw, achieving its highest
score ever. Warsaw reaches 17th position (+9) on the back of broad-based Nordic cities demonstrate
improvement, but most notably due to its GDP score, the third highest in the index
after Istanbul and London, driven by an upgraded growth outlook underpinned by
strong consumption. All Polish cities improve in both score and ranking boosted by
stability
improved GDP and Employment scores, but are held back by their Wealth and at the top of the ranking
Business Environment scores which are below the European average.
• Italian cities are generally lower or stable in the ranking this year as slowing
economic momentum and a downgraded population growth outlook result in lower
Employment scores. Milan (33/-1) remains the only Italian city in the index with a
Large improvements from
Warsaw
strong score and is forecast to see the second-highest GDP growth rate over the
next five years after Bologna (57/-). Turin (77/+4) is an outlier in an Italian context
as the city marginally improves due to stronger historic and forecast GDP growth.
At a national level, high debt levels will continue to weigh on the economy, as will
ongoing concerns about the new populist government, reflected by the weak achieving highest
Business Environment score of Italian cities.
score ever
• Despite historically being some of the most volatile cities in the E-REGI index,
Spanish cities are relatively stable in this year’s ranking. Lower GDP scores, mostly
due to a change in base year, were offset by higher Employment scores driven by a A fall in the rankings from
Italian cities
stronger service sector employment growth outlook. This upgrade is supported by
the population growth outlook changing from negative last year to positive this year.
• All three Dutch city regions in the E-REGI index, Amsterdam (20/-), Rotterdam-Den
Haag (24/-2) and Utrecht (26/-3), are found in the top third of the index. Relatively
high Human Capital, Wealth and Business Environment scores mean the strength of
from slower economic
these cities in the ranking is broad-based. Rotterdam-Den Haag in particular has momentum
benefited from the introduction of the Human Capital component in 2016; in the 16
years prior to this Rotterdam-Den Haag averaged 57th position in the ranking but has
averaged 21st position over the last three years.
Most progress in the
• In general, the main Nordic cities demonstrate stability at the top of the ranking, with
Stockholm (3/-), Oslo (9/-1), Copenhagen-Malmö (10/-) and Helsinki (14/+2) all rankings was
remaining in the Top 20. The underlying strength and consistency of these cities in
the E-REGI ranking is due to high levels of wealth and strong Human Capital scores.
The Human Capital scores of these cities are driven particularly by a high percentage
Ljubljana
of the population with tertiary education and high levels of patent production. jumping 21 places
• Of all the cities in the index, Ljubljana made the most progress in the ranking,
jumping 21 places to 25th position having improved on all components.
LaSalle Investment Management LaSalle E-REGI Index 2018 26-0.50
0.00
0.50
1.00
1.50
2.00
2.50
Score of 1
London (1)
Paris (2)
LaSalle
Stockholm (3)
Istanbul (4)
Munich (5)
Dublin (6)
is European
Luxembourg (7)
Stuttgart (8)
Investment
Oslo (9)
Copenhagen-Malmö (10)
Zürich (11)
average
Madrid (12)
Score of 1 is European average
Brussels (13)
Helsinki (14)
Berlin (15)
Geneva (16)
Warsaw (17)
Frankfurt (18)
Lyon (19)
Amsterdam (20)
Barcelona (21)
Gothenburg (22)
Vienna (23)
Rotterdam-Den Haag (24)
Ljubliana (25)
Utrecht (26)
LaSalle E-REGI Ranking 2018
Bern (27)
Cologne-Bonn (28)
Mannheim-Karlsruhe (29)
Hamburg (30)
Nuremburg (31)
Toulouse (32)
Management | LaSalle Research Seminar 2018
Milan (33)
Düsseldorf (34)
Growth
Prague (35)
Basel-Mulhouse (36)
Antwerp (37)
Bilbao (38)
Seville (39)
Valencia (40)
Bratislava (41)
Ankara (42)
Marseilles-Nice (43)
Edinburgh (44)
Wealth
Birmingham (45)
Athens (46)
Bremen (47)
Manchester (48)
LaSalle E-REGI Index Scores 2018
Bristol (49)
Nantes (50)
Bordeaux (51)
Budapest (52)
Leipzig-Dresden (53)
City Ranking
Hannover (54)
Tallin (55)
Krakow (56)
City Ranking
Bologna (57)
Poznan (58)
Wroclaw (59)
Ruhr (60)
Nottingham-Derby (61)
Lisbon (62)
Izmir (63)
Rome (64)
Cardiff (65)
Zaragoza (66)
Bielefeld (67)
Business Environment
Tricity (Gdansk) (68)
Glasgow (69)
Lille (70)
Liège (71)
Katowice (72)
Verona-Venice (73)
Strasbourg (74)
Rouen-Le Havre (75)
Leeds (76)
Turin (77)
Liverpool (78)
Antalya (79)
Saarland (80)
Florence (81)
Lodz (82)
Belfast (83)
Newcastle (84)
Bucharest (85)
Sofia (86)
LaSalle Investment Management
Sheffield (87)
Porto (88)
Thessaloniki (89)
Vilnius (90)
Genoa (91)
Riga (92)
Szczecin (93)
Naples (94)
Zagreb (95)
Palermo (96)
Moscow (97)
Yekaterinburg (98)
St Petersburg (99)
Nizhny Novgorod (100)
14
LaSalle E-REGI Index 2018
27Technical Note E-REGI Coverage The model combines variables on economic growth, the
overall level of wealth, and the relative attractiveness of
The LaSalle E-REGI (“European Regional The model covers 295 regions across 32 countries the business environment. The overall score is made up
Economic Growth Index”) was first published by in Europe with a total population of more than 745 million. from three component scores.
This report focuses on a subset of 100 major cities
LaSalle Investment Management in 2000 with (metros with ≥500,000 inhabitants and all national The growth score accounts for 60% of the model and is
the aim of identifying those European regions capitals). Compared to last year, the coverage has composed of three components:
with the greatest economic growth potential remained unchanged. • GDP (22.5%): together with employment growth the
over the medium term. E-REGI complements The E-REGI analysis is undertaken on geographic regions principal driver of real estate occupier demand. The
other more real estate specific approaches to as defined by Eurostat, the central statistical bureau for model uses historic growth (to capture momentum)
determining target markets. The index is the European Union. Eurostat has adopted a classification and forecasts, both in absolute and relative terms.
updated annually and published in October. system, the Nomenclature of Territorial Units for Statistics, • Service sector employment (22.5%): together with
referred to as “NUTS”. This classification provides a employment growth, the principal driver of real estate
breakdown of administrative units for the production of occupier demand and also closely correlated with
regional statistics within the European Union and beyond. population growth. The model uses historic growth (to
GDP NUTS is a hierarchical classification. The country level is capture momentum) and forecasts, both in absolute
referred to as NUTS 0. NUTS 1, 2 and 3 are sub-national and relative terms.
22.5% levels. The E-REGI model uses the NUTS 2 level
classification, which we believe is best suited to capture
• Human Capital (15%): an important indicator of
long-term economic value. The model uses the
urban agglomerations. However, one should be aware outputs from the LaSalle’s European Human Capital
Service Sector that in formulating the NUTS-level classification, Eurostat index (LEHCI) which aims to measure Skilled Labour,
Employment has attempted to standardise a disparate set of national Creativity and Investment and is composed of six
22.5%
classification systems and as a result, NUTS 2 regions do variables (Tertiary Education Attainment Level,
not always provide the most appropriate definition of a city University Ranking, Population Density, Patent
region. In some cases, a combination of NUTS 2 and 3 Production, R&D expenditure as % GDP, and Capital
areas that better correspond with the physical and Venture Invested in Tech Firms).
economic agglomeration of those cities has been used
Human Capital The wealth score (accounting for 20% of the model) acts
for the E-REGI analysis.
15% as a further screen to ensure that regions catching up
from a lower base are not unduly represented. Market
E-REGI Model intelligence also suggests that wealth levels are correlated
Wealth score with demand for real estate.
The E-REGI model is expressed as the function set out in
20% Figure 1 and presents a weighted overall score based on
three sub-scores consisting of 18 variables. The variables
The business environment score (accounting for 20% of
the model) has been included as future growth potential is
partially determined by the attractiveness of the business
used in the model are set out in Figure 2. For each
variable, the model calculates a score based on the environment. Best prospects are likely to be in those
Business Environment countries that benefit from a stable political, monetary,
region’s performance relative to the average of all regions,
Score fiscal and regulatory environment.
with the average represented by a score of unity (“1.00”).
20% The E-REGI ranking then sorts the city regions based on
their weighted overall score.
LaSalle Investment Management LaSalle E-REGI Index 2018 28Data Sources Figure 2
Data for the E-REGI model is primarily provided by independent data provider Oxford
1. GROWTH 60%
Economics, which supplies historic data and provides forecasts on NUTS 1, 2 and 3
levels for GDP, service sector employment and population. Oxford Economics also A. GDP 22.5%
provides the risk scores that underpin the business environment scores. These data
GDP growth 2015-17 2.5%
are provided at national level.
Forecast GDP Growth 2018-22 7.5%
Data for LaSalle’s European Human Capital index is primarily provided by Eurostat (for
the variables Tertiary Education Attainment Level, Population density, R&D expenditure Forecast GDP Growth 2018-22 (% growth) 12.5%
as % GDP). The University Ranking score is provided by the Centre for World University
Rankings (CWUR). This consulting organisation publishes annually global university B. Service Sector Employment 22.5%
ranking based on quality of education, alumni employment, quality of faculty, number of Employment Growth 2015-17 2.5%
publications, number of publications in renowned journals, citations and number of
patents. Data on Patents are provided by the Organisation for Economic Co-operation Forecast Empl. Growth 2018-22 (absolute) 7.5%
and Development (OECD), while the data on Venture Capital in to Technology companies Forecast Empl. Growth 2018-22 (% growth) 12.5%
is from Thomson Reuters.
C. Human Capital 15%
The E-REGI model is based upon data which LaSalle Research & Strategy believes to be
reliable. Whilst every effort has been made to ensure the accuracy and completeness of Education Level 3.7%
the data used, we cannot offer any warranty that factual errors may not occur. National Quality of Education 2.3%
statistical offices across Europe continue to make progress in their efforts to improve data
comparability and accuracy. As such, economic data are commonly revised many years Patent Production 3.0%
after events have occurred.
Agglomeration Effect 1.5%
R&D Expenditure as % GDP 3.0%
Figure 1 Venture Capital Invested in Tech Firms 1.5%
E-REGI = F[GDP, EMPm, HC, WEALTH, BEnv]
2. WEALTH 20%
GDP Change in GDP
GDP per Capita 2016
EMPm Change in number of Employees in Market Services
HC Stock of Human Capital 3. BUSINESS ENVIRONMENT 20%
WEALTH Level of GDP per Capita A. Risk Metrics
BEnv Quality of Operating Business Environment Sovereign Default 5.0%
Political Stability 5.0%
Trade Credit 5.0%
B. Participation in EMU / EFTA / EU 5.0%
TOTAL 100%
LaSalle Investment Management LaSalle E-REGI Index 2018 29Contacts
Mahdi Mokrane Simon Marx
Head of European Strategy Investment Strategist / Managing Director – UK
London London
+44 (0)20 7852 4605 +44 207 852 4492
mahdi.mokrane@lasalle.com simon.marx@lasalle.com
Anne Koeman-Sharapova Eduardo Gorab
Senior Strategist (Project Leader) Associate Strategist – UK
London London
+44 (0)20 7852 4520 +44 207 852 4214
anne.koeman@lasalle.com eduardo.gorab@lasalle.com
Chris Psaras Ryan Daily
Associate Strategist – Continental Europe Research Analyst – UK
London London
+44 (0)20 7852 4016 +44 207 852 4107
chris.psaras@lasalle.com ryan.daily@lasalle.com
Sabrina Zimmermann
Research Analyst – Continental Europe
London
+44 (0)20 7852 4016
sabrina.zimmermann@lasalle.com
This document does not constitute an offer to sell, or the solicitation of an offer to buy, and is subject to correction, completion and amendment without notice. This document has been
prepared without regard to the specific investment objectives, financial situation or particular needs of recipients. No legal or tax advice is provided. Recipients should independently evaluate
specific investments. By accepting receipt of this publication, the recipient agrees not to distribute, offer or sell this publication or copies of it and agrees not to make use of the publication
other than for its own general information purposes.
The views expressed in this document represent the opinions of the persons responsible for it as at its date, and should not be construed as guarantees of performance with respect to any investment.
LaSalle has taken reasonable care to ensure that the information contained in this document has been obtained from reliable sources but no representation or warranty, express or implied, is
provided in relation to the accuracy, completeness or reliability of such information. LaSalle does not undertake and is under no obligation to update or keep current the information or content
contained in this document for future events. LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this document.
Copyright © LaSalle Investment Management 2018. All rights reserved. No part of this document may be reproduced by any means, whether graphically, electronically, mechanically or
otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior written permission
of LaSalle Investment Management.
LaSalle Investment Management is authorised and regulated by the Financial Conduct Authority in the UK.
LaSalle Investment Management LaSalle E-REGI Index 2018 30You can also read
