Mind the Gap - Pitfalls with current Data Availability - Hela Hinrichs, Director EMEA Research JLL - International Conference on Real Estate ...
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Mind the Gap – Pitfalls with current Data Availability Hela Hinrichs, Director EMEA Research JLL
Mind the Gap – Pitfalls with current Data Availability
Real Estate Transparency
Real Estate Data Availability
Commercial Property Price Indicators
Opportunities and Challenges
2
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.JLL’s Global Real Estate Transparency Index for 2018
The components What’s new with the 2018 Index?
Performance Unlisted fund indices by investment style,
Measurement e.g. core vs. value-add
Market Coverage and availability of data
Fundamentals in the ‘alternatives’ sector
Governance of Data disclosure practices
Listed Vehicles of listed real estate firms
Regulatory Beneficial ownership and anti-
money laundering legislation
and Legal
Transaction Existence and consistency of
Process property measurement standards
Transparency of sustainability measures
Sustainability included for the first time
3
Source: JLL, LaSalle Investment Management
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.The world’s most transparent countries in 2018
1 United Kingdom
Highly 2 Australia
1 Transparent 3 United States
Highly Transparent
4 France
‘Highly Transparent’
2
Transparency Tiers
Transparent 5 Canada group accounts for 75%
6 Netherlands of global direct real
Semi- 7 New Zealand estate investment
3
Transparent 8 Germany
9 Ireland
Low
4 10 Sweden
Transparency
11 Finland
Transparent
12 Singapore
5 Opaque
13 Hong Kong
14 Japan
Source: JLL, LaSalle Investment Management
4
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.Transparency Index: Market fundamentals
Market Fundamentals Scores
Sector Coverage Netherlands 1,4
France 1,7
United Kingdom 1,8
Market coverage - country, 1 Highly Poland 1,9
city, submarket Transparent Germany 2,0
Finland 2,0
Consistent Definitions Italy 2,1
2 Transparent Denmark 2,2
Length of consistent Spain 2,2
Slovakia 2,3
series Czech Republic 2,3
Semi-
3 Austria 2,3
Transparent Ireland 2,3
Forecasts
Belgium 2,6
Low Hungary 2,8
Disaggregated Databases 4 Romania 2,8
Transparency
(total stock/inventory, Sweden 2,8
Luxembourg 2,9
lease and investment
Portugal 3,2
deals) coverage 5 Opaque Greece 3,5
Bulgaria 3,6
Slovenia 3,9
5
Source: JLL, LaSalle Investment Management
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.Capital Values are influenced by various Indicators
Economic Financial and Debt
Fundamentals Market Conditions
Political and Legal Consumer and Tenant
Environment “Behaviour”
Real Estate Market Indicators -
Demand & Supply
Source: JLL
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.
6Supply is a key factor for rental forecasts
Disaggregated Stock/Inventory Data in Europe
Stock/Inventory
Private proprietary
Public accessible Source Private accessible Source Source
Vacancy Office No No Yes
Retail No No/SC yes No/SC yes
Completions
Industrial No No No/Logistics yes
Under Construction Residential No No Yes
Other No No No
Future Supply
None of the data is complete, but all these indicators should
be analysed as percentage of stock/inventory
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.
7Transactions are key ingredients for property pricing
Disaggregated Lease Data in Europe
Private accessible Private proprietary
Public accessible Source Source Source
Office No Yes, in some countries Yes
Retail No Yes, in some countries yes, but focus on high street
Industrial No Yes, in some countries yes, but focus on logistics
Residential No no yes
Other No No No
None of the data is complete, but
lease contracts and transactions
Disaggregated Transactions Data in Europe should be analysed for
Commercial Property Price
Private accessible Private proprietary
Public accessible Source Source Source Indices.
Office No Yes, in some countries Yes
Retail No Yes, in some countries Yes
The proportion of confidential
Industrial No Yes, in some countries Yes, but focus on logistics
Residential No Yes, in some countries Yes deals is increasing
Other No No Yes
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved. 8Prime Capital Value Definition
Prime Office Rent
Represents the top open-market rent that
could be expected for a notional office unit of
Prime Capital Value the highest quality and specification in the
best location in a market, as at the survey
date (normally at the end of each quarter Prime Office Yield
Represents the top open-market capital value period). The rent quoted normally reflects
(per square metre) that could be expected for Represents the best (i.e. lowest) “rack-rented” yield
prime units of over 500 m² of lettable estimated to be achievable for a notional office
a notional office building of the highest quality floorspace, which excludes rents that
and specification in the best location on the property of the highest quality and specification in
represent a premium level paid for a small the best location in a market, as at the survey date
survey date (normally at the end of each quantity of space.
quarter period). (normally at the end of each quarter period). The
property should be let at the prevailing market rent
The Prime Rent reflects an occupational to a first class tenant with an occupational lease
Prime capital values are derived from prime lease that is standard for the local market. It
rents and prime net yields: that is standard for the local market. The prime
is a face rents that does not reflect the initial net yield is quoted, i.e., the initial net income
financial impact of tenant incentives, and at the date of purchase, expressed as a
Capital Value = (Prime Annual Rent / Prime excludes service charges and local taxes. It
Yield From) * 100 percentage of the total purchase price, which
represents JLL’s market view and is based includes acquisition costs and transfer taxes.
on an analysis/review of actual transactions
for prime office space, excluding any The Prime Yield represents JLL’s “market view”,
unrepresentative deals. Where an based on a combination of market evidence where
insufficient number of deals have been available and a survey of expert opinion.
made for prime office space, an assessment
of rental value is provided by reference to
transactions generally in that market
adjusted accordingly to equate to prime.
Source: JLL
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved. 9Eurozone Prime Capital Value Indices
1980=100
2600
Y-o-Y Q-o-Q
% Change
Q4 17 – Q4 18 Q3 18 – Q4 18
Office 10.3 2.7
2100
Unit Shops 3.6 0.6
Warehousing 10.9 2.5
1600 Shopping Centre -4.5 -4.1
Retail Warehousing Parks 1.7 -0.4
1100
600
100
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Office Unit Shops Warehousing Shopping Centre RWP
Source: JLL, February 2019
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved. 10Eurozone Prime Capital Value Indices - Forecast
1980=100
2600 Forecasts
Y-o-Y 2019 – 2022
% Change
Q4 17 – Q4 18 pa
Office 10.3 -1.5
2100
Unit Shops 3.6 -2.3
Warehousing 10.9 -0.4
1600
1100
600
100
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Office Unit Shops Warehousing
Source: JLL, November 2018 forecasts
11
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.Eurozone Prime Capital Values react sharply to economic downturns
Eurozone Capital Value change y-o-y in %
50
40
30
20
10
0
-10
Dot-Com Bubble
-20
ERM/UK Crisis
GFC
-30
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Office Unit Shops Warehousing
Source: JLL, February 2019
12
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.Secondary Office Capital Values more stable than
Prime
Capital Value change Y-o-Y in % Capital Value change Y-o-Y in %
25,0
30,0 Paris Munich
20,0
20,0
15,0
10,0
10,0
0,0 5,0
-10,0 0,0
-20,0 -5,0
-10,0
-30,0
-15,0
-40,0
-20,0
20082009201020112012201320142015201620172018
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Paris prime Paris secondary Munich prime Munich secondary
Average Prime Average Secondary Average Prime Average Secondary
Source: JLL, February 2019
13
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.Yield compression the main driver of capital value growth this cycle…
Contribution to annual capital value growth for prime European offices (%)
30
+ 23% + 26%
20
+ 18%
10
0
-10
- 10%
-20
- 18%
- 26%
-30
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Rental impact Yield impact Total CV growth
Source: JLL
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.… but rental growth to underpin capital value growth moving forward
Forecast average annual office capital value growth drivers (%): 2019-2020
6
Rental Impact Yield Impact Annual CV Growth (Avg 19-20)
4
2
0
-2
-4
-6
-8
Madrid
Munich
Barcelona
Lisbon
Lyon
Luxembourg
Dusseldorf
Amsterdam
Berlin
Paris
Frankfurt/M
Hamburg
Dublin
Helsinki
Brussels
Milan
Rotterdam
Source: JLL, November 2018 forecasts
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.Measure the market | Upside to rental forecast in tightest markets
JLL Supply Sensitivity Ranking
Steady State Vacancy Rate
At what vacancy rates do net effective rents stabilise?
Below this stable rate, rental growth starts to accelerate.
18,0
16,0
14,0
Vacacny Rate (%)
12,0
10,0
8,0
6,0
4,0
2,0
0,0
Vacancy rate at which net effective rents are stable Q4 2018
Source: JLL
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.Measure the market | Hidden supply-demand imbalances could
impact rents
Flexible Office Stock as % of Total stock Factoring in Flex Space vacancy
‘real’ vacancy rates not supporting rental growth
6,0% Creates a lack of
visibility of:
5,0% vacancy 16,0
demand and tenant 14,0
4,0% mix 12,0
rents – dynamic pricing
10,0
3,0%
8,0
Hidden vacancy
6,0
2,0% In the major office markets,
unreported vacancy in flex 4,0
1,0% space could add 70–90 bps 2,0
to vacancy rates 0,0
0,0%
Dublin
Stockholm
Berlin
Munich
Hamburg
London
Amsterdam
Barcelona
Milan
Düsseldorf
Lisbon
Frankfurt
Madrid
Brussels
Paris
Vacancy rate at which net effective rents are stable
Q2 2018 Vacancy rate (incl flex vacancy)
Source: JLL
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.
17Opportunities and Challenges : Does the future look brighter?
Benefits of the Prime Capital Values approach: We require:
Easy to collect and timely Property stock/inventory databases
Consistent definitions for all sectors
Transactions based Leasing transactions databases for
Long quarterly series and forecasts all sectors
Available on city, submarket, Investment transactions databases
country and aggregate level for all sectors
Seems to predict turning points
early in the cycle
May lead valuation based measure
But:
“Notional” approach in thin or illiquid
markets
Does not cover the whole market
(geography)
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.
18Opportunities and Challenges : Does the future look brighter?
Digitalisation of the RE Industry Anti-Money Laundering and
and the Rise of Proptech
Beneficial Ownership rules
Transparency
Drivers
Cyber security & data Environmental, Social
and Corporate
protection Governance (ESG)
© 2019 Jones Lang LaSalle IP, Inc. All rights reserved.
19Hela Hinrichs
Director EMEA Research
+49 (0)40 35011 237
hela.hinrichs@eu.jll.com
This presentation is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang LaSalle IP, Inc. The information
contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that
we may correct them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.
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