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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.

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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

In response to a slowing European economy and heightened global risks, there has been a radical U-turn from central banks in the approach to monetary policy. In the Eurozone, we now anticipate a “lower for longer” environment and that there will be further stimulus in the form of asset purchases. This is already reflected in bond markets and is helping sustain downward pressure on property yields. Pricing of traditional core property is at record highs in most European markets, and the search for yield has investors looking beyond traditional property sectors. Mixed-use assets present an attractive investment opportunity. As more people flock to urban areas, multi-functional schemes are turning developments into destinations, drawing people together to live, work and play while providing investors with a diversified income profile. In this latest edition of Europe Watch, we examine a burgeoning trend toward mixed-use, its development to date in major European cities, and the reasons why investors are increasingly drawn to this distinct property type.

MIXED-USE AS A TOOL FOR REGENERATING CITIES

Mixed-use properties are gaining prominence across Europe. Typically blending residential, commercial and cultural uses into one site, the intention is often to reimagine underutilised site, create complimentary uses and promote pedestrian flows. Mixed-use schemes are either contained in a single building or part of a wider regeneration project aiming to improve the overall fabric and appeal of a city. Across most of Europe, government policy has supported the continuation of the city centre’s role as a main location for business, retail and leisure activity, explaining the rapid evolution of mixed-use schemes in city centre locations. Paris is a great example with numerous innovative projects underway, with the objective of reinvigorating city centre living. In Rotterdam, the redevelopment of the docks has been occurring since the 1980s and now includes a variety of locally embraced uses. Interestingly, if we look at the 2019 Mercer Quality of Living Survey which ranks 231 cities globally on quality of life, we see that the top performing cities in Europe are those which have incorporated mixed-use as part of their urban development strategy, including Vienna, Zürich and Munich.

SEPTEMBER 2019

3,426.76

1.2%

Euro Stoxx 50

0.00%

=

ECB Policy Rate

-0.698%

25 bps

10-yr. German Bond

$60.43

7.3%

Brent Crude

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

110-YEAR GOVERNMENT BOND YIELDS
IN THE EUROZONE DECLINING FURTHER
PRINCIPAL CONTRIBUTORS:
 
Najeeb Ahmed
Karine Woodford
MIXED-USE CAN GENERATE REVENUE PREMIA

From an investor perspective, the main reason for considering mixed-use is a diverse income profile. Indeed, the mix of uses in a building can generate a rent premium over an adjacent single-use building. Mixed-use buildings also provide some diversification within the same asset or investment. For example, if the retail component of a mixed-use building suffers because that local market or sector is underperforming, the office and residential components of that same building may continue to produce revenue growth. Finally, a mixed-use asset presents opportunities for retrofitting during a business plan, thus protecting against downside risks.

2019 MERCER QUALITY OF LIFE SURVEY –
EUROPEAN CITY RANKING

Source: Mercer

GERMANY DOMINATES MIXED-USE INVESTMENT

So where are the development and investment opportunities? Development can be an entry path to mixed-use ownership in major European markets. The last two years have seen a rapid increase in mixed-use property construction across Europe and this trend is expected to continue. In a challenging environment, retailers see the value of mixed-use developments. At the end of last year, IKEA announced plans to invest €3bn in such developments in European city centres. Ingka Centres are looking at cities such as Madrid and Stockholm, with the aim of buying sites to redevelop, including former post offices or department stores. There are also opportunities to buy core, or mixed-use assets in many European cities, which many investors are drawn to because of the anticipated steady cash flow.

RELATIVE YIELDS IN GERMANY

Source: CBRE Research

TOP MIXED-USE INVESTMENT DEALS IN 2019

It is undeniable that investors – particularly those with a long-term view – can generate compelling returns and predictable income by investing in mixed-use assets. Although developers face some constraints as some cities have strict building and planning regulations and designing innovative projects can be challenging, the better use of space through mixed-use regeneration can have positive implications for our cities. It’s not just about regenerating rundown areas but also about thinking about how to better utilise urban environments for the benefit of inhabitants. Mixed-used schemes can be a winning format which has exciting and varied possibilities. One thing is clear – occupiers, locals, tourists, developers and investors alike all stand to benefit from new modern schemes of the future.

TOP MIXED-USE INVESTMENT DEALS BY SIZE, 2019 – EUROPE

Source: PMA

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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