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OUR COMPANY AFFILIATES

CBRE GROUP

CBRE Group, Inc. is the world’s largest commercial real estate services and investment firm, with 2018 revenues of $21.3 billion and more than 90,000 employees (excluding affiliate offices). CBRE has been included in the Fortune 500 since 2008, ranking #146 in 2019. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.

INVESTMENT SERVICES

CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers with $106 billion in assets under management.

Built up over more than 40 years, our unparalleled platform is focused on real assets, giving our institutional clients access to real estate and infrastructure in the Americas, Europe and Asia Pacific. Our clients benefit from a complete range of investment solutions including equity and debt, direct and indirect, and listed and unlisted strategies.

Trammell Crow Company, founded in Dallas, Texas in 1948, is one of the nation’s oldest and most prolific developers of, and investors in, commercial real estate.The CBRE Global Investors and Trammell Crow Company platforms make up the Real Estate Investments division of CBRE Group.

The Real Estate Investments division is led by
Mike Lafitte, Global CEO, Real Estate Investments.

BLOGS

Regularly released content on the state of the real estate and infrastructure industry are produced by our subject matter experts and shared on their blogs. A selection of them can be found below.

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EUROPE WATCH

Another year has gone by, and despite economic growth across Europe moderating, it is fair to say that 2019 was a positive year for the European real estate markets. Christine Lagarde, the ECB’s new president, is expected to maintain the current direction in terms of monetary policy established by her predecessor, Mario Draghi. With no major Central Bank policy adjustments expected, real estate will remain an attractive target for investors in 2020. Central and Eastern Europe (CEE) is expected to perform well and be bolstered by overseas capital. On the 16th December, the mayors of Budapest, Prague, Warsaw and Bratislava met in the Hungarian capital and signed a “Pact of Free Cities”, pledging to cooperate on issues ranging from environmental protection to urban planning. This is in line with a global trend where civic leaders are cooperating on regional issues that ultimately helps bolster the credentials for investing in real estate. In 2020’s first edition of Europe Watch, we welcome in the New Year with a special look at the CEE markets as they continue to offer compelling risk-adjusted returns in the current environment.

GROWTH IN CEE CONTINUES TO OUTPACE THE EUROZONE

Economic growth in CEE remained strong in Q3, demonstrating the region’s resilience to weakness in Eurozone manufacturing activity. As a result, 2019 is likely to end slightly below 4% of real GDP growth, well above the 1.2% growth forecast for the Eurozone. For 2020, we still expect growth to gradually slow, as global trade remains lackluster and domestic investment and construction declines. However, household consumption is expected to remain strong and prevent a sharper slowdown. With occupier fundamentals expected to remain positive, investor attraction to core CEE markets is forecast to remain buoyant.

JANUARY 2020

3,745.15

1.1%

Euro Stoxx 50

0.00%

=

ECB Policy Rate

-0.180%

18 bps

10-yr. German Bond

$66.00

5.7%

Brent Crude

Data points through end of December 2019. Change represents month-over-month change.

REAL GDP GROWTH CEE* VS. EUROZONE
PRINCIPAL CONTRIBUTORS:
 
Najeeb Ahmed
Esat Güler
STRONG INVESTOR INTEREST FOR CEE ASSETS,ESPECIALLY OFFICES

The CEE region remains successful in attracting investors, as illustrated by the total volume invested in the first three quarters of the year which reached EUR 11.4 bn, thereby already exceeding the 10-year average of EUR 8 bn. If the last quarter of the year keeps up this momentum, there is a strong likelihood that 2019 could turn into a record-breaking year for the investment market. Poland accounts for the major share of investment – at around 58% of the total – whilst the office sector is the most popular asset class accounting for 62% of the total – significantly higher than the 10-year average of 36%.

CORE CEE INVESTMENT VOLUMES, EUR BN

Core CEE = Poland, Czech Rep., Hungary, Romania, Slovakia
Source: Real Capital Analytics

STRONG OFFICE OCCUPIER MARKET FUNDAMENTALS IN MAJOR CEE CAPITALS

This investor interest for CEE offices is explained by strong fundamentals in major markets such as Warsaw, Prague and Budapest. Whilst there is strong construction activity in some markets such as Warsaw and Budapest, demand for office space continues to outpace supply and is resulting in declining vacancy rates. Whilst Warsaw’s vacancy rate stands at 8.25%, Prague and Budapest are recording office vacancy of below 6% and lower still in the CBD areas. Healthy levels of demand and the low vacancy rates resulted in strong rental growth figures in Prague and Budapest during the year, with prime office rents growing by approximately 5% and 4% respectively. Warsaw, however, couldn’t replicate 2018’s growth of 4%, with rents remaining stable so far this year.

OFFICE VACANCY RATES

Source: CBRE Research

POLISH REGIONAL OFFICE MARKETS GAIN ATTENTION

Outside of Warsaw, the Polish regional office markets attracted a solid share of capital. Over EUR 1.2 bn was deployed during 2019 to second-tier markets. Whilst still small in a pan-European context, markets like Krakow, Wroclaw or Tri-City have almost doubled their modern office stock in the last decade. This means that they are now on a par with established British cities such as Leeds, Liverpool, and Birmingham. A major source of demand for this office space is the business services sector which recorded strong employment growth figures of more than 10% p.a. between 2016 and 2019. A key contributor driving the interest in these cities is the ability for employers to access a skilled and international labour pool through various excellent universities.

WARSAW VS. REGIONAL POLAND OFFICE INVESTMENT VOLUMES, EUR BN

Source: Real Capital Analystics

REGIONAL MARKETS OFFER AN ATTRACTIVE YIELD PREMIUM

Polish regional office markets hold an attractive yield premium of more than 160 bps to Warsaw and more than 330 bps to core Western European markets. This partially reflects lower liquidity and occupier market risks compared to core markets in Western Europe. However, investors are attracted by positive structural demand drivers, outperforming GDP growth, low unemployment rates and sound job growth figures paired with stronger return prospects in an otherwise low-yield low-return environment.

WARSAW VS. REGIONAL POLAND –
PRIME OFFICE YIELDS

*Regional Poland = unweighted average of Krakow, Katowice, Poznan, Sczecin, TriCity, Wroclaw, Lublin
Source: CBRE Research

Related Content

Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy & Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such.

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