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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 on theme: "18 th European Real Estate Society (ERES) Conference Eindhoven June 2011 Graeme Newell University of Western Sydney Stanley McGreal, Martin Haran, Michael."— Presentation transcript:

1 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: g.newell@uws.edu.au

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

3 PURPOSE OF THE PAPER  Eleven (11) major European direct property markets – 10 yrs (2001-2010)  Risk-adjusted performance  Portfolio diversification  Mixed-asset portfolios  Property investment implications

4 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

5 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

6 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

7 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

8 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%

9 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

10 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: $154B @ 24% global

11 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

12 PROPERTY ACTIVITY: Q1 2011 ♯ 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: $44B @ 24% global

13 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

14 METHODOLOGY  Stocks (FTSE Indices)  Bonds (10Y Government Bonds)  2001-2010 :annual  Risk-adjusted performance, portfolio diversification  European property markets omitted : 6

15 DIRECT PROPERTY: IPD 2010 Country ♯ Properties Value (Bn)% Coverage Denmark1,004€ 14.042% Finland2,285€ 20.551% France7,489€ 113.854% Germany4,281€ 46.217% Ireland305€ 2.482% Netherlands4,654€ 38.834% Norway577€ 15.138% Portugal1,012€ 9.863% Spain330€ 8.521% Sweden1,105€ 24.824% UK11,276€ 154.557% Total34,318€ 448.4

16 DENMARK ASSET PERFORMANCE (2001-2010)

17 FRANCE ASSET PERFORMANCE (2001-2010 )

18 SPAIN ASSET PERFORMANCE (2001-2010)

19 UK ASSET PERFORMANCE (2001-2010)

20 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%

21 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%

22 PROPERTY PERFORMANCE: 2001-2010 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

23 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%-20.46 Germany-0.32%27.49%-86.81 Ireland-6.99%30.26%-4.33 Netherlands-2.55%27.02%-10.62 Norway8.36%33.35%3.99 Portugal-1.53%23.89%-15.64 Spain1.78%21.98%12.35 Sweden-0.94%34.83%-37.17 UK2.34%18.10%7.74 Pan-Europe-1.61%24.25%-15.02

24 PORTFOLIO DIVERSIFICATION  Within Sector  Within Country

25 DIVERSIFICATION: PROPERTY Den.Fin.Fra.Ger.Ire.Net.Nor.Por.Spa.Swe.UKPan Den. 1.00 Fin. 0.631.00 Fra. 0.820.881.00 Ger. -0.330.18-0.131.00 Ire. 0.840.620.89-0.281.00 Net. 0.820.780.870.060.841.00 Nor. 0.780.800.92-0.140.880.781.00 Por. 0.660.570.720.120.790.930.661.00 Spa. 0.840.710.92-0.200.940.920.820.851.00 Swe. 0.720.850.91-0.170.730.640.900.420.731.00 UK 0.540.140.55-0.420.780.380.620.410.600.521.00 Pan 0.760.560.86-0.230.950.720.870.670.850.780.891.00

26 DIVERSIFICATION: STOCKS Den.Fin.Fra.Ger.Ire.Net.Nor.Por.Spa.Swe.UKPan Den. 1.00 Fin. 0.791.00 Fra. 0.930.751.00 Ger. 0.910.720.991.00 Ire. 0.830.620.800.751.00 Net. 0.950.730.98 0.791.00 Nor. 0.890.720.940.920.780.931.00 Por. 0.830.730.96 0.740.910.861.00 Spa. 0.870.810.950.940.780.900.870.961.00 Swe. 0.880.750.900.890.590.900.800.890.861.00 UK 0.970.800.970.950.790.990.940.89 0.921.00 Pan 0.930.790.99 0.810.970.930.960.970.900.971.00

27 UK DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office0.951.00 Retail0.980.881.00 Industrial0.990.940.981.00 Stocks0.380.580.250.311.00 Bonds-0.04-0.150.04-0.01-0.671.00

28 FRANCE DIVERSIFICATION All PropOfficeRetailInd.StocksBonds All Prop1.00 Office0.991.00 Retail0.960.921.00 Ind.0.960.94 1.00 Stocks0.760.73 0.631.00 Bonds-0.31-0.33-0.22-0.21-0.571.00

29 GERMANY DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office0.951.00 Retail0.300.021.00 Industrial0.150.070.611.00 Stocks-0.14-0.300.540.561.00 Bonds-0.060.00-0.22-0.05-0.661.00

30 SWEDEN DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office0.991.00 Retail0.970.931.00 Industrial0.860.830.901.00 Stocks0.760.790.680.541.00 Bonds-0.18-0.21-0.14-0.29-0.181.00

31 SPAIN DIVERSIFICATION All PropOfficeRetailIndustrialStocksBonds All Prop1.00 Office0.991.00 Retail0.980.961.00 Industrial0.970.980.921.00 Stocks0.710.760.610.751.00 Bonds-0.11-0.18-0.01-0.14-0.571.00

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

33 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

34 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

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