CBRE Group, Inc. is the world’s largest commercial real estate services and investment firm, with 2017 revenues of $14.2 billion and more than 80,000 employees (excluding affiliate offices). CBRE has been included in the Fortune 500 since 2008, ranking #207 in 2018. 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.
CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers with $105 billion in assets under management.
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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.
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.
After intense, albeit anticlimactic, days around the originally scheduled Brexit Day at the end of March, the debate regarding the UK’s future relationship with Europe seems to have taken a breather. It has also receded from public debate in Europe since the prolongation of the exit date has been agreed. The new due date is Halloween 2019, which hopefully won’t turn into too scary a night for Europe. However, European politics continue to influence the economic outlook, with the latest manifestation being the eagerly awaited election in Spain at the end of April – the third in four years. The Socialist Workers Party of the current prime minister became the strongest party again, which should help stabilize political conditions in Spain. However, an absolute majority has not been achieved, which will likely prolong the formation of a government, as it did after previous elections. Comparable to what has happened in other countries in Europe, a right-wing populist party has entered the Spanish Parliament, but they are not yet expected to play an important role in the government formation. This contrasts with Italy, where the dispute between the two populist parties appears to be intensifying. The announced reform measures are expected to be put on ice, and the discussion about possible new elections is gaining momentum. As a result, long-term Italian bond yields have increased in April, and the spread to German government bond yields has widened.
CONCERNS ON FISCAL HEALTH REMAINS AND WEIGHS NEGATIVE ON ECONOMY
In Italy, longer-term concerns about its fiscal health and political risks remain reflected in elevated Italian government bond yield spreads to German bonds. While the European Commission decided against opening an Excessive Deficit Procedure against Italy in December, the Italian budget agreement remains far from ideal. Concerns remain that underlying problems of the economy will have a negative impact on economic development. While larger fiscal deficits leave Italians debt position much more vulnerable to risks, GDP forecast does not suggest a financial crisis. That’s because existing Italian debt has a relatively long maturity. However, the economic outlook for Italy remains very muted for the forthcoming two years with forecast GDP growth of 0,3% and 0,4% p.a., in 2019 and 2020, respectively.
Euro Stoxx 50
ECB Policy Rate
10-yr. German Bond
Data points through end of April 2019. Change represents month-over-month change.
10-YEAR GOVERNMENT BOND YIELD
Source: Thompson Reuters Datastream
Alimou Bah Esat Güler
ITALY COULD DEFY THE ECONOMIC GLOOM
Italy’s GDP grew by 0.2% in Q1 2019, after a modest recession in the second-half of 2018. The economic growth in the first quarter beat expectations and could boost the country’s outlook for the remainder of the year. Unemployment rate dropped to 10.2%, which is the lowest since 2012. Yet, Italy’s GDP is still 5% below its level in 2008 and continues to underperform the wider Eurozone’s economy. Furthermore, the debt issue is still a major hurdle for the country with public debt-to-GDP ratio at 132%, the second-largest in the EU after Greece. Also, with the recent negative surveys suggesting a more subdued business sentiment, the odds are against Italy’s GDP to outperform expectations for the rest of the year. However, if the rest of the Eurozone continues to improve and political uncertainty eases, we could see the rebound of the Italian economy gain momentum.
ITALY’S GDP, QUARTERLY & ROLLING ANNUAL GROWTH
Source: Thompson Reuters Datastream
SLOWDOWN IN EUROPEAN INVESTMENT CONTINUES TO REVERBERATE IN ITALY
European real estate investment was sluggish in Q1 2019, dragged down by a combination of slowing economic growth, high prices and challenges in sourcing suitable stock. The slowdown was echoed in Italy where investment was also down in the first quarter, with a total of just €1.3 Billion invested—a third lower than the 10-year quarterly average. With the ongoing uncertainty and weak business sentiment, the Italian property investment market will remain challenging in the near future. Nonetheless, investor interest in Italian assets is still strong, particularly for prime assets which are still attracting a depth of demand from various capital sources.
ITALY PROPERTY INVESTMENT VOLUME (€MLN )
Source: Real Capital Analytics
SPOTLIGHT ON MILAN
Milan bucked the wider trend across the top European markets as investment grew by 64% y-o-y in Q1. Such strong performance propelled the city at the seventh place for top European investment markets in the first quarter; and reinforced Milan’s stature as the dominant hotspot for real estate investment in Italy. As the business and economic hub of Italy, Milan’s GDP has typically grown faster than the country’s as whole, and outperformed Rome’s GDP. Milan is an international business centre well-renowned for its creative and design industries, attracting both fashionistas and investors alike. However, while the foundations of the city’s attractiveness in pulling in capital remain solid, the shaky political ground in Italy could hamper investor sentiment. This could dent Milan’s progress towards the top of Europe’s largest investment markets.
EUROPEAN TOP CITIES FOR PROPERTY INVESTMENT IN Q1 2019 (€MLN)
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