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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 $107 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
Danny Queenan, 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

After four days of Europe-wide voting, the much-awaited European Parliamentary election ended on May 26. Whilst pro-European parties remain the major force in place, their ranks have become more fragmented. Traditional political forces have lost ground, with the vote share of the conservative (EPP) and socialist (S&D) alliances coming in well below those of 2014. In contrast, the Greens gained more ground than anticipated. As a result, they will have a much greater power base than in the previous term, when the two dominant party alliances (EPP and S&D) held an absolute majority. While the gain for the far-right were less than anticipated, they remain well-represented. This fragmentation of the European political landscape certainly complicates the appointment of top positions within the European Union over the next months. Given the challenges the EU is facing (Brexit and U.S.-trade negotiation), swift decision making is needed. However, it was not all about politics on that election night – certainly not in Finland. When Marko Anttila –whose nickname is “The Groke” after a Finnish cartoon character – scored the goal that claimed the lead in the World Cup final against Canada, the election night turned into a World Cup ice-hockey party. Coming back to the EU election results in Finland, these were largely in line with those reported in other EU countries, with the large traditional parties suffering losses, and green, liberal and nationalist parties by contrast increasing their presence in Brussels.

DESPITE FALLING SENTIMENT ECONOMIC FUNDAMENTALS REMAIN SOLID

The Finnish economy held up well in the first quarter of the year, with GDP growth of 2,0% y/y driven largely by strong consumption, as the labour market remains robust with unemployment falling to rates last seen in 2008. In contrast, market sentiment has fallen further to below 100 in May, reflecting worries related to the weak global trade environment, with US-China trade tensions escalating further. Finland is an open economy, heavily dependent on exports and any trade disruptions will weigh on the external sector. Looking ahead, we still expect growth to slow but remain at a solid 1.9% in 2019. Relatively robust domestic demand should ensure Finland continues to outperform the Eurozone as a whole. Low unemployment, rising wages and subdued inflation is expected to keep consumer demand healthy this year.

JUNE 2019

3,280.43

6.7%

Euro Stoxx 50

0.00%

ECB Policy Rate

-0.020%

30 bps

10-yr. German Bond

$684.49

10.7%

Brent Crude

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

FINLAND – CORRELATION AND TEMPORARY BREAKDOWN
BETWEEN (SOFT) SENTIMENT DATA AND (HARD) GDP DATA
PRINCIPAL CONTRIBUTORS:
 
Najeeb Ahmed
Esat Güler
POLARIZED OFFICE MARKET WITH RISING PRIME RENTS IN THE CBD

The Helsinki office market is very polarized. This is the reason why Helsinki witnessed strong prime rental growth, despite increases in the overall vacancy rate over the last decade. A significant part of the overall vacancy is outdated and poorly located office stock waiting to be repositioned. On the other hand, centrally located, modern office space with good public transport accessibility is becoming scarcer. Therefore, whilst the vacancy rate in city center submarkets is around 5%, it is down to a historically low 4% in the CBD.

HELSINKI PRIME OFFICE RENTS VS. VACANCY RATE

Source: CBRE

RETAIL SALES ARE MAINLY DRIVEN BY E-COMMERCE

Private consumption accounts for more than 50% of total expenditures in Finland, well ahead of government consumption and investments (around 20% each). This is based on healthy economic fundamentals and very low unemployment. Accordingly, retail sales growth has been solid. However, internet retailing accounted for the bulk of this expansion as the long-term growth trend for store-based retail was rather moderate. This is also reflected in the relatively high e-commerce penetration in Finland, which, whilst lower than in Denmark, is higher than Sweden, Norway and major Western European markets such as France, Germany, Belgium or Switzerland.

RETAIL SALES GROWTH FINLAND

Source: Real Capital Analytics

STRONG DEMAND FOR RESIDENTIAL DRIVES RENTAL GROWTH

The Finnish residential market is characterized by strong urbanization trends and decreasing household sizes. This strong population influx into major cities like Tampere, Turku, and especially Helsinki is driving apartment rents, despite comparatively high construction activity. Whilst rental increases have been observed throughout the country, the picture for house prices is more heterogenous. Whilst Helsinki saw a strong increase in house prices in recent years, the rest of Finland is currently transforming into a buyers’ market as there is an increasing number of flats for sale and sales periods are getting longer.

UK RETAILER ADMINISTRATIONS

Source: Statistics Finland; Rent Index reflects rents of non subsidised rental dwellings; Price Index reflects prices of old dwellings in housing companies.

HELSINKI AMONG TOP TARGETED INVESTMENT MARKETS IN 2018

Whilst this might seem surprising to some, Helsinki was one of Europe’s most liquid investment markets in 2018. Though behind the likes of London, Paris, or Frankfurt, it was ahead of Amsterdam, Madrid, and Milan and also well ahead of major Scandinavian cities. Foreign buyers accounted for more than 60% of the total volumes reached in 2018. The fact that Finland is part of the Eurozone makes it very appealing to investors from other Eurozone-countries, as there is no currency risk, unlike other major Nordic markets. This strong investor demand is also reflected in the pricing, as prime office yields in Helsinki compressed further this year to 3.40%, whilst prime High Street and Shopping Center yields remained stable, at 3.50% and 4.50% respectively. Industrial yields currently stand at 5.00%.

ALL SECTORS

Source: CBRE Research

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This information is for our clients and investors only. 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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