18 th European Real Estate Society (ERES) Conference Eindhoven June 2011 Graeme Newell University of Western Sydney Stanley McGreal, Martin Haran, Michael.

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Presentation transcript:

18 th European Real Estate Society (ERES) Conference Eindhoven June 2011 Graeme Newell University of Western Sydney Stanley McGreal, Martin Haran, Michael McCord University of Ulster Contact author:

INTRODUCTION  International Property Investment  European Property Investment  Previous Property Research -Direct -Securitised

PURPOSE OF THE PAPER  Eleven (11) major European direct property markets – 10 yrs ( )  Risk-adjusted performance  Portfolio diversification  Mixed-asset portfolios  Property investment implications

GLOBAL COMPETITIVENESS ♯ 1. Switzerland ♯ 2. Sweden ♯ 5. Germany ♯ 7. Finland ♯ 8. Netherlands ♯ 9. Denmark ♯ 12. UK ♯ 14. Norway ♯ 15. France ♯ 18. Austria ♯ 19. Belgium ♯ 20. Luxemburg

CORRUPTION PERCEPTION ♯ 1. Denmark ♯ 4. Finland ♯ 4. Sweden ♯ 7. Netherlands ♯ 8. Switzerland ♯ 10. Norway ♯ 11. Luxemburg ♯ 14. Ireland ♯ 15. Austria ♯ 15. Germany ♯ 20. UK ♯ 22. Belgium ♯ 25. France

INSTITUTIONAL GRADE PROPERTY MARKET ♯ 3. Germany ♯ 4. UK ♯ 5. France ♯ 7. Italy ♯ 8. Spain ♯ 11. Russia ♯ 14. Netherlands ♯ 16. Switzerland ♯ 17. Belguim ♯ 18. Turkey ♯ 19. Sweden ♯ 21. Norway ♯ 22. Austria ♯ 24. Poland ♯ 26. Denmark

PROPERTY TRANSPARENCY ♯ 3. UK ♯ 4. Sweden ♯ 7. Ireland ♯ 8. France ♯ 9. Netherlands ♯ 10. Germany ♯ 11. Belgium ♯ 12. Denmark ♯ 13. Finland ♯ 14. Spain ♯ 15. Austria ♯ 17. Norway ♯ 19. Portugal ♯ 20. Switzerland ♯ 21. Italy ♯ 22. Poland ♯ 24. Czech Rep. ♯ 27. Hungary

MAJOR PROPERTY FUND MANAGERS: EUROPE EXPOSURE ING: 39%UBS: 54%RREEF: 45% Morgan Stanley: 35%JP Morgan: 10%Pramerica : 21% LaSalle: 34%Aberdeen: 97%AEW: 67% CB Richard Ellis: 38%Cornerstone: 20%Tishman Speyer: 17% Heitman: 16%PruPIM: 86%Hines: 20%

SECURITISED PROPERTY ♯ 7. France ♯ 8. UK ♯ 11. Sweden ♯ 18. Germany ♯ 20. Netherlands REITs ♯ 3. France ♯ 4. UK ♯ 8. Netherlands ♯ 10. Belgium ♯ 13. Turkey ♯ 16. Germany

PROPERTY ACTIVITY: 2010: COUNTRIES ♯ 3. UK ♯ 4. Germany ♯ 6. France ♯ 11. Sweden ♯ 13. Russia ♯ 14. Spain ♯ 17. Netherlands ♯ 19. Italy ♯ 21. Poland ♯ 22. Norway ♯ 23. Finland ♯ 24. Turkey EUROPE: 24% global

PROPERTY ACTIVITY: 2010: CITIES ♯ 1. London ♯ 4. Paris ♯ 10. Stockholm ♯ 15. Moscow ♯ 21. Berlin ♯ 23. Frankfurt INDIVIDUAL TRANSACTIONS: 2010 ♯ 4. London ♯ 5. London ♯ 7. London ♯ 8. Berlin ♯ 9. London ♯ 10. Frankfurt

PROPERTY ACTIVITY: Q ♯ 3. UK ♯ 5. Germany ♯ 7. France ♯ 11. Sweden ♯ 12. Italy ♯ 13. Poland ♯ 16. Spain ♯ 17. Netherlands ♯ 19. Czech Rep. ♯ 21. Austria ♯ 22. Belgium ♯ 23. Turkey EUROPE: 24% global

METHODOLOGY * Denmark* Finland* France * Germany* Ireland* Netherlands * Norway* Portugal* Spain * Sweden* UK* Pan-European EUROPEAN DIRECT PROPERTY MARKETS : 11 COUNTRIES Direct Property: IPD Total Returns *All PropertyRetail*Office*Industrial

METHODOLOGY  Stocks (FTSE Indices)  Bonds (10Y Government Bonds)  :annual  Risk-adjusted performance, portfolio diversification  European property markets omitted : 6

DIRECT PROPERTY: IPD 2010 Country ♯ Properties Value (Bn)% Coverage Denmark1,004€ % Finland2,285€ % France7,489€ % Germany4,281€ % Ireland305€ 2.482% Netherlands4,654€ % Norway577€ % Portugal1,012€ 9.863% Spain330€ 8.521% Sweden1,105€ % UK11,276€ % Total34,318€ 448.4

DENMARK ASSET PERFORMANCE ( )

FRANCE ASSET PERFORMANCE ( )

SPAIN ASSET PERFORMANCE ( )

UK ASSET PERFORMANCE ( )

PROPERTY PERFORMANCE: 2010 Country1Y5Y10Y Denmark5.27%7.66%9.06% Finland7.04%7.43%6.91% France9.97%9.06%9.68% Germany4.21%3.21%3.01% Ireland-2.38%-7.26%1.69% Netherlands4.58%6.18%7.61% Norway8.16%8.47%9.32% Portugal4.24%6.18%8.78% Spain4.94%3.80%7.19% Sweden10.45%7.59%6.39% UK15.09%1.14%6.83% Pan-Europe7.99%4.54%6.09%

STOCK PERFORMANCE: 2010 Country1Y5Y10Y Denmark38.93%9.41%6.76% Finland6.09%-0.26%-9.36% France13.97%1.24%-1.18% Germany18.70%5.64%-0.32% Ireland5.32%-15.26%-6.99% Netherlands27.04%2.18%-2.55% Norway32.31%8.12%8.36% Portugal4.05%1.00%-1.53% Spain2.53%3.32%1.78% Sweden45.38%6.22%-0.94% UK23.14%5.12%2.34% Pan-Europe12.27%1.15%-1.61%

PROPERTY PERFORMANCE: Property Market Average Annual Return Annual Risk Risk: Return Ratio Denmark9.06%5.13%0.57 (5) Finland6.91%2.27%0.33 (1) France9.68%7.36%0.76 (7) Germany3.01%1.50%0.50 (2) Ireland1.69%19.42%11.50 (11) Netherlands7.61%4.08%0.54 (3) Norway9.32%6.75%0.72 (6) Portugal8.78%4.76%0.54 (4) Spain7.19%8.37%1.16 (9) Sweden6.39%6.58%1.03 (8) UK6.83%12.69%1.86 (10) Pan-European6.09%4.63%0.76

STOCK PERFORMANCE Stock Market Average Annual Return Annual Risk Risk: Return Ratio Denmark6.76%24.93%3.69 Finland-9.36%26.99%-2.88 France-1.18%24.09% Germany-0.32%27.49% Ireland-6.99%30.26%-4.33 Netherlands-2.55%27.02% Norway8.36%33.35%3.99 Portugal-1.53%23.89% Spain1.78%21.98%12.35 Sweden-0.94%34.83% UK2.34%18.10%7.74 Pan-Europe-1.61%24.25%-15.02

PORTFOLIO DIVERSIFICATION  Within Sector  Within Country

DIVERSIFICATION: PROPERTY Den.Fin.Fra.Ger.Ire.Net.Nor.Por.Spa.Swe.UKPan Den Fin Fra Ger Ire Net Nor Por Spa Swe UK Pan

DIVERSIFICATION: STOCKS Den.Fin.Fra.Ger.Ire.Net.Nor.Por.Spa.Swe.UKPan Den Fin Fra Ger Ire Net Nor Por Spa Swe UK Pan

UK DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office Retail Industrial Stocks Bonds

FRANCE DIVERSIFICATION All PropOfficeRetailInd.StocksBonds All Prop1.00 Office Retail Ind Stocks Bonds

GERMANY DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office Retail Industrial Stocks Bonds

SWEDEN DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office Retail Industrial Stocks Bonds

SPAIN DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office Retail Industrial Stocks Bonds

PROPERTY/STOCK CORRELATIONS Denmark0.44Finland0.75 France0.76Germany-0.14 Ireland0.78Netherlands0.54 Norway0.50Portugal0.44 Spain0.71Sweden0.76 UK0.38Pan-Europe0.58

PROPERTY/BOND CORRELATIONS Denmark-0.06Finland-0.41 France-0.31Germany-0.06 Ireland0.19Netherlands-0.53 Norway-0.29Portugal-0.07 Spain-0.11Sweden-0.18 UK-0.04Pan-Europe-0.10

EUROPEAN PROPERTY INVESTMENT IMPLICATIONS  Size; maturity; significance  Risk-Adjusted Returns  Portfolio Diversification * Sectors * Countries  Mixed-Asset Portfolios  Other Property Markets: IPD Austria, Belgium, Czech Rep. Italy, Poland, Switzerland, CEE  International Investor Perspectives