Tim Luckman, director of valuation advisory, JLL

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Information about Tim Luckman, director of valuation advisory, JLL
Real Estate

Published on March 5, 2014

Author: PlaceNorthWest

Source: slideshare.net

The Investment Market Tim Luckman Director, Valuation Advisory 5 February 2014

Agenda • Economy • Investment trends • Office sector • Industrial sector • Retail and leisure sector • Conclusions

Economy

UK Confidence Indicators Optimism at post-crisis high Source: European Commission, October 2013

GDP % YoY 1990-2017 Economic Growth Eurozone leads the downswing in 2012 YoY% 6.0 UK Eurozon e Wo rld Forecasts 4.0 2.0 0.0 -2.0 -4.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -6.0 Source: Oxford Economics,

Investment Trends

Current Trends – UK Investment Activity £ billions Investment by Region £30 £25 £25 £22 £20 £18 £17 £16 £15 £15 £12 £12 £10 £12 £11 £8 £7 £5 £0.34 2008 2009 United Kingdom £0.39 £0.37 £0.15 £0 2010 2011 London 2012 Manchester £0.41 £0.16 2013

Current Trends – Who are the vendors ? 3% 13% Institutions / Pooled Funds 44% Private Investor Propco's 30% 7% Insolvency / Consensual 3% Unknown Other Source: Jones Lang LaSalle, 2013

Current Trends – Who are the purchasers? Global 67% UK 33% Source: Jones Lang LaSalle, 2013 2013 (£m) 67% 33%

Global Sources of Funds America UK Domestic Europe Middle East Global Asia Pacific

Offices

Key Messages | Q4 2013 • Big 6 take-up totals 4.3m sq ft in 2013, up 35% compared to 2012 • Manchester & Leeds account for the biggest share of take-up across the Big 6 • Big 6 supply down 15% since end 2012 - to 10.1 million sq ft • Average overall vacancy rate of 9.4%, across the Big 6 • Grade A supply severely constrained – further tightening expected in the short term • 1.0 million sq ft under construction across the Big 6, of which almost half is in Glasgow • Prime rents increase in a number of markets in Q4 2013 • The weight of money targeting the regions continues to place inward pressure on yields

Manchester City Centre Take-up Solid performance in terms of leasing activity 000s sq ft Take-up 1,400 5 Year Average 1,200 1,000 800 600 400 200 0 2003 2004 Source: Jones Lang LaSalle, 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013

Manchester Supply Supply down 9% since end 2012 000s sq ft Supply (LHS) 3,000 Vacancy Rate (RHS) 14% 12% 2,500 10% 2,000 8% 1,500 6% 1,000 4% 500 2% 0 0% 2003 2004 Source: Jones Lang LaSalle, 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013

Manchester Speculative Development | Q4 2013 Just one scheme currently under construction 900 800 000's sq ft 700 600 500 400 300 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Completed U/C Source: Jones Lang LaSalle 2014 Definite Spec Start Likely Spec Start 50/50 Spec Start

Big 6 Investment Volumes by Purchaser Nationality 1400 1200 1000 800 600 400 200 0 2008 2009 2010 UK Source: Jones Lang LaSalle 2014 Overseas 2011 Undisclosed 2012 2013

Long Term Prime Average Yields – UK Cities Prime UK regional yields nearing long term average levels Prime Yield % Regional Prime Yield 10.0 10 Year Average Long term Average 9.0 London City London West End 6.00% 6.23% 4.75% 5.38% 3.75% 4.37% 5.94% 5.54% 4.72% 8.0 7.0 6.0 5.0 4.0 Dec-87 Dec-88 Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 3.0 Regional preferred Source: Jones Lang LaSalle 2014 West End WE Average City City Average

One Angel Square, £142m December 2012 REEF Estates/ Ginko Tree Investments, 6 %

100 Barbirolli Square, £41m June 2013 Moorfield and Oaktree Capital Management, 8.75 %

1 Hardman Street £7m December 2013 Charles Street Buildings Group, 5.4%

Scottish Widows Investment Partnership, 6.25 % Sunlight House, £34.5m, January 2014

Industrial

Industrial Market – Current themes Occupational - Distribution • Good levels of take up • Grade A Supply continues to diminish • Strong demand from retailers • Return of speculative development in prime locations Occupational - Estates • Demand and supply vary according to local micro markets • Limited new supply is hampering demand • Industrial land continues to suffer pressure from higher value uses • Increase in activity from occupiers catering for online retail fulfilment particularly parcel carriers

Property Market Overview: Yields as at January 2014 Sentiment Supply Yield Single-let Prime London 5.50% South East 5.75% Regions 6.00% • Good occupational story • Limited stock • Depth of investors • Yields down Multi-let Prime • Positive sentiment London 5.50% South East 5.75% Regions 6.75% • Asset class still looks good value • Strong demand will continue

Standard Life Investments, 5.6 % Travis Perkins, Omega North, £52.8m October 2013

Delin, 7.5 % Titan 350, £15m January 2014

Retail and Leisure

Retail Warehouse / Leisure Investment Yields (Stronger) Restricted Parks (Bulky) 6.00% (Stable) Solus Bulky / DIY 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 5.25% 6.25% (Stable) Secondary RW 7.25% (Stable) Foodstores 4.25% (Stronger) Leisure 6.00% (Stable) Mar-91 Mar-01 Mar-04 Mar-05 Mar-06 Mar-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Nov-12 Mar-13 Jun-13 Sep-13 Nov-13 Open A1 Parks (Fashion)

CBRE Global Investors, 5.7% The Circus, £24.45m January 2014

Great Northern £71.1 m September 2013 Confidential

Conclusions

SE will remain expensive

Who are and will be the purchasers? 2013–2015

AND FINALLY… • Occupational markets continue to improve • Rental growth • More speculative development • Further compression of yields • Gap between prime and secondary continues to narrow • More availability of debt BUT CAUTION – debt more expensive! • Generally, 2014 another strong year January – What a month!

Questions Tim Luckman Director, Valuation Advisory One Piccadilly Gardens Manchester M1 1RG tim.luckman@eu.jll.com 0161 828 6426 COPYRIGHT © JONES LANG LASALLE IP, INC. 2014

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