abn amro real estate market update 2015 q1

ABN AMRO Real Estate

Market update

Real Estate Advisory

May 2015

2

Dutch economy in international perspective

The Dutch ESI is in line with the Eurozone Economic sentiment in the Eurozone increased

The first quarter, the Economic Sentiment Indicator (ESI), reported

three consecutive months of improvements on the back of a strong

increase in confidence in the services sector.

In contrast to the Eurozone the Netherlands reported a drop (-1.2) as

negatives in the construction and industrial sector overshadowed an

increase of confidence of consumers and the services sector.

Looking at other countries we see that during the fist quarter Italy

(+5.3) and Spain (+3.4) showed strong increases, while Germany

(+0.4) and France (+0.8) were only small positives.

In April, after three consecutive months of improvements, the ESI

remained broadly unchanged in both the euro area and the

Netherlands.

Yields on Dutch government bonds to remain low

While yields on German and Dutch government bonds showed small

increases at the end of April, ABN AMRO economists expect yields

to remain low.

The economists revised their estimates slightly upwards and now

expect the 10-year Yield to be at 1.4% at the end of 216 compared to

1.0% previously.

This increase can be explained by more positive macro-economic

data, which could prompt the ECB to unwind the asset purchase

program.

However as core inflation remains low, ABN AMRO expects the ECB

to continue the program and does not foresee interest rates

increases before 2016.

Source: CBS, Datastream and IPD

Yield on 10-year government bonds (%)

80

90

100

110

120

130

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q

'10 '11 '12 '13 '14 '15

The Netherlands GermanyBelgium UKEurozone France

0

1

2

3

4

5


'10 '11 '12 '13 '14 '15

The Netherlands Germany

France Belgium

UK

3

Dutch economy in focus – GDP growth broadly based

GDP is back on the rise but well below the level of 2008 Competiveness improves due to favourable exchange rate

GDP growth revised upward

The Dutch economy is growing faster than expected. In the fourth

quarter GDP improved by 0.8% on a quarterly basis, instead of the

0.5% that was previously reported.

Companies are hiring more staff, although preferably on flexible

contracts. The growth in jobs has made consumers feel more positive.

Consumer confidence is at its highest level in over seven years.

Foreign trade remains important to the Dutch economy. In the fourth

quarter exports rose by 4.5%. Dutch companies are benefiting from

the economic recovery in the US & UK and favourable exchange

rates.

550

570

590

610

630

650

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

BBP (EUR mld. totaal vier kwartalen)

1

1.1

1.2

1.3

1.4

1.5

1.6

90

95

100

105

110

115

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Reëel effectieve wisselkoers EUR/USD (ra)Source: CBS, Datastream and Directorate

General for Economic and Financial Affairs

(DG ECOFIN)

Economy grew further in the second half of 2014

-3%

-2%

-1%

0%

1%

2%

3%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

'10 '11 '12 '13 '14

Household consumption Public Expenditure

Total investment Change in inventories

Net Exports GDP growth (qoq %)

3

2

1

-1

-2

0

-3

3

GDP (EUR bn-12 months rolling) Real effective exchange rate (rhs)

4

The market is off to a good start in 2015

Take-up volume per asset class (thousand sqm) IPD: Direct return per country and asset class in 2014 (%)

Source: Datastream, IPD and JLL

Investment volume remains solid

During the first quarter, investment volume came in at EUR 1.6bn,

most deals where already announced before the end of last year.

Of the investment volume 98% was attributable to the following four

asset classes:

• Offices: EUR 287m (+10% yoy)

• Retail: EUR 265m (-66% yoy)

• Residential: EUR 710m (+189% yoy)

• Logistics / industrial: EUR 282m (-10% yoy)

Overall take-up was solid, demand for warehouses increased 97%

compared to one year earlier.

Direct returns on offices and retail are attractive compared to

surrounding countries. This partially explains the continued interest in

Dutch property from foreign investors.

Investment volumes per quarter (EUR bn)

0

3

6

9

12

2009 2010 2011 2012 2013 2014 2015

Q1 Q2 Q3 Q4

191 166

458

241

151

901

0

250

500

750

1,000

Offices Retail Warehouses

'14Q1 '15Q1

4

5

6

7

8

9

NL GE FR UK BE

All Retail Office Industrial Residential

5

Offices: the economic recovery underpins demand from investors

Supply take-up and vacancy (JLL) Investment returns (IPD)

Macroeconomic factors (in %)

Source:Datastream, CBS, JLL, ABU and

IPD

Improving occupier demand further drives investor demand

As corporate spending recovers so does the job market. There have

been fewer dismissal applications. Companies are also hiring more

staff. Although they prefer to do so on flexible contracts.

Investment volume in the first quarter came in at EUR 287m, and

was dominated by transactions in Amsterdam that accounted for

59%. This was helped by one large transaction at the Zuidas

(Zuiderhof I, EUR 52m).

2015 had good start as take-up during the first quarter increased

26% to 241k sqm helped by large transactions in the public sector,

vacancy came in at 12.7% 1Q ‘15 vs. 13.1% EOY 2014

During the first quarter of 2015 the IPD-index reported an income

return of 5.4% and capital growth at -2.6%.

Asian consortium makes entry on

the Zuidas

First Sponsor Group Limited, an Asian

real estate investor buys with Asian

private investors Zuiderhof I in

Amsterdam ifom investment manager

AEW Europe.

The buyer notifies a purchase price of

€ 51.5 million. Seller of the property is

Euroffice 445. This is the first

transaction of First Sponsor Group

Limited who stated it wishes to do

more acquisitions in the Netherlands.

PropertyNL, 20 February 2015

-20

-10

0

10

20

30

-3

-2

-1

0

1

2

3

4

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

'10 '11 '12 '13 '14

GDP growth (yoy %)

Job vacancies growth (yoy %) (rhs)

"White collar" job vacancies growth (yoy %) (rhs)

0

4

8

12

16

0

2,000

4,000

6,000

8,000

10,000


'10 '11 '12 '13 '14 '15

Supply (sqm x1000)

Take-up as % of supply (rhs)

Vacancy % (rhs)

-12

-8

-4

0

4

8

12

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4QQ1

'10 '11 '12 '13 '14 '15

Capital growth (% 12m rolling)

Income return (% 12m rolling)

Total return (% 12m rolling)

6

Residential: Sentiment remains positive as the market stabilizes

Source: CBS, Datastream, Calcasa , IPD

and DNB

Number of transactions and market sentiment Investment returns and market rent changes (%) (IPD)

Macroeconomic factors (in %) Outlook is positive, confidence is back at the level of 2004

After a buoyant fourth quarter the market seems to have calmed

down and stabilised somewhat while the number of transactions still

lies well above the level of Q1 2014.

The number of transactions has continued to pick up despite the fact

that the temporary expansion of the donation tax exemption scheme

came to an end on 1 January and credit standards have tightened

further this year.

The general outlook remains positive as market sentiment has been

stable for the last 7 months, at the highest level since 2004.


return of 4.7% and capital growth at 1.5%.

-6

-4

-2

0

2

4

6

8


'10 '11 '12 '13 '14 '15

Capital growth (% 12m rolling) Income return (% 12m rolling)


5

10

15

20

25

30

-4

-2

0

2

4

6


'10 '11 '12 '13 '14 '15

GDP growth (yoy %)

Interest rate on new mortgages (avg duration)

Affordability (housing cost/disposable income) (rhs)

0

20

40

60

80

100

120

100

110

120

130

140

150

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

'10 '11 '12 '13 '14 '15

# of transactions 12-months rolling

Average price (indexed, '10Q1 =100) (rhs)

VEH market sentiment

7

Supply, take-up and vacancy (JLL) Investment returns (IPD)

Economy: Retail sales are back on the rise Consumer confidence is at the highest level

Source: CBS, Datastream, CBRE, Locatus,

JLL and IPD

Consumer confidence is at its highest level in seven years. This

optimism is supported by rising share prices and increased

spending power.

However, retailers are still under pressure. Large retailers such as

V&D and Blokker have announced reorganisations and recently

Miss Etam (fashion) filed for bankruptcy.

Traditionally take-up is relatively low in the first quarter. Take up in

the first quarter came in at 151k sqm, 9% below the level of 2014.

Demand focus on prime retail in large cities. Demand is improving

across all prime retail segments in the top 20 cities, with the prime

high street and luxury segments continuing to perform particularly

well.

During the first quarter of 2015; the IPD-index reported an income

return of 6.1% and capital growth of -3.1%.

Retail: Structural trends remain in tact, as international retailers continue to

dominate the market

Vastned: ”polarization in Dutch

retail”

Prime locations in popular cities show

rents string increases, while

elsewhere rents are decreasing.

This signals the listed property

company Vastned who published first

quarter results. The contrast between

popular and less popular sites is

clearly visible.

This is in accordance with the

company’s strategy to invest in large

cities.

FD, May 11

-50

-30

-10

10

30

50

-6

-4

-2

0

2

4

6

'05 '07 '09 '11 '13 '15

Retail sales (% growth, 12-month rolling))

Consumer confidence (rhs)

-8

-4

0

4

8

12


'10 '11 '12 '13 '14 '15

Income return (% 12m rolling)

Capital growth (% 12m rolling)


0

5

10

15

20

0

1,000

2,000

3,000

4,000


'10 '11 '12 '13 '14 '15

Supply (sqm x1000)


Vacancy (% of rental value)

8

Logistical / industrial: Positive economic environment will continue to

benefit the market

The transport sector is outperforming (in %) Economic conditions remain positive

Source: CBS, Datastream and IPD

International trade remains an important contributor. With exports

likely to increase further in the course of the year. Companies are

benefiting from the weaker Euro as well as the global recovery.

Investment volume came in at EUR 252m in the first quarter.

Largest investors were; PingProperties, WP Carey and Prologis.

These three investors all bought +35.000sqm buildings.


return of 5.4% and capital growth at -2.6%.

Given the fragmented nature of the industrial market and the modest

allocation of capital to industrial in the benchmark (4%), this might

not be representative of the Dutch market.

Supply, take-up and vacancy (JLL) Investment returns (IPD)

-40

-30

-20

-10

0

10

20

30

40

50

-8

-6

-4

-2

0

2

4

6


'10 '11 '12 '13 '14 '15

GDP growth (yoy %)

GDP of storage & transport (yoy %)

Vacancies, transport & storage (yoy %) (rhs)

-9

-6

-3

0

3

6

9


'10 '11 '12 '13 '14 '15

Capital growth (% 12m rolling) Income return (% 12m rolling)


0

4

8

12

16

0

3,000

6,000

9,000

12,000

15,000


'10 '11 '12 '13 '14 '15

Supply (sqm x1000)


Vacancy % (rhs)

9

Recent transactions – Offices

Date Asset Description Vendor & purchaser Pricing

2015 Q2 INIT Building 34,000sqm office space

Czaar Peterstraat 213,

Amsterdam

Vendor: EuroPrisa

Amsterdam Init

Purchaser: Lone Star

Funds

EUR: 58.8m

Yield: NA

EUR/sqm:1,729

2015 Q2 Leeuwenburg 64,000sqm office space

Weesperzijde 190,

Amsterdam

Vendor: Van der Vorm

Vastgoed

Purchaser: Vastint

Netherlands B.V.

EUR: 61m

Yield: NA

EUR/sqm: 953

2015 Q2 Alexander Portfolio Three buildings: New

Tide. Signum, and New

Delphi

34,000sqm office space

Vendor: Sachwerte

Rendite Fonds Holland 53

Purchaser: OVG Real

Estate

NA

2015 Q1 Zuiderhof I 12,538sqm office space

Jachthavenweg 121,

Amsterdam

Vendor: AEW (Euroffice

445 BV)

Purchaser: First Sponsor

Group Limited

EUR: 51.5m

Yield: NA

EUR/sqm: 4,108

2015 Q1 Rabobank 28,000 sqm office space

Fellenoord 15, Eindhoven

Vendor: OVG Real Estate

Purchaser: WP Carey

Amount: EUR 30.8m

Yield: NA

EUR/sqm: EUR 1,100

2015 Q1 The New Loft Offices 7,670sqm office space

De passage 126-136,

Amsterdam

Vendor: APF International

Purchaser: Credit Suisse

Amount: EUR 18.4m

Yield: NA

EUR/sqm: EUR 2,399

10

Recent transactions – Residential


2015 Q1 Portfolio WIF Portfolio

3,786 units

Vendor:

Wooninvesteringsfonds

Purchaser: Round Hill

Capital

Amount: EUR 365m

Yield: 7.0%-7.5% (GIY)

Price per unit: EUR 96.4k

2015 Q1 Portfolio 500 Multifamily units Vendor: CBRE Global

Investors


Capital

Amount: EUR 54m

Yield: NA

Price per unit: EUR 108k

2015 Q1 Portfolio Bergen op Zoom,

Geldrop, Haarlem en

Voorschoten ong.

500 Multifamily units

Vendor: Delta Lloyd

Vastgoed

Purchaser: private

investor

Amount: EUR 53m

Yield: NA

Price per unit: EUR 106k

2015 Q1 Portfolio 465 Multifamily units Vendor: Staalbankiers


Capital

Amount: EUR 45m

Yield: NA

Price per unit: EUR 96.8k

2014 Q4 Portfolio Vestia Portfolio

4157 units

Vendor: Vestia

Purchaser: Patrizia

Amount: EUR 458.2m

Yield: NA

Price per unit EUR 110k

11

Recent transactions - Retail


2015 Q2 Kalverstraat 11-17/Rokin 12-

16, Amsterdam

Premium shopping centre

6,000sqm

Vendor: private investors

Purchaser: Vastned

EUR: 108m

Yield: NA

EUR/sqm: 18,000

2015 Q2 Haaglanden Megastores Shopping Centre

85,000sqm

Vendor: ING

Purchaser: Meijer Realty

Partners (MRP)

EUR: 66m

Yield: NA

EUR/sqm: 776

2015 Q1 W.C. Waterlandplein,

Amsterdam

Shopping centre

9,600sqm

Vendor: Ymere

Purchaser: Optare Rei

EUR 28.5m

Yield: NA

EUR/sqm: EUR 2,965

2015 Q1 Woonboulevard Westpoort,

Amsterdam

Retail Warehouse Park

45,000sqm

Vendor: Unknown

Purchaser: VALAD

EUR 20.0m

Yield: NA

EUR/sqm: 444

2014 Q4 Project 14, portfolio Shopping Centre

108,500sqm

Vendor: CBRE Global

Investors

Purchaser: The

Blackstone Group

International Partners LLP

EUR 240.3m

Yield: NA

EUR/sqm: 2,214

2014 Q4

Kalvertoren, Amsterdam

Shopping centre

11,500sqm

Vendor: Rreef Investment

Purchaser: Kroonenberg

groep

EUR 117.5m

Yield: NA

EUR/sqm: 10,217

12

Recent transactions - Logistics


2015 Q2 Portfolio 17 assets in the

Netherlands and Germany

181,000sqm

Vendor: Various

Purchaser: Mstar (joint

venture)

EUR: 74.5m

Yield: NA

EUR/sqm: 411

2015 Q1 Nippon Express Distribution

Centre

70,906sqm

Rotterdam

Vendor: Borghese

Logistics

Purchaser: WP Carey

EUR: 37.5m

Yield: 6.25 - 6.75% (GIY)

EUR/sqm: 529

2015 Q1 Verscentrum AH 40,200sqm

Nieuwegein

Vendor: Borghese Real

Estate

Purchaser: Prologis

European Properties

EUR: 36.9m

Yield: 6.5 - 7.0% (GIY)

EUR/sqm: 917

2014 Q4 Afrikahaven Distribution

Centre

107,344sqm

Amsterdam

Vendor: DHG

Purchaser: Delin Capital

Asset Management

(DCAM)

Amount: EUR 68.5m

Yield: NA

EUR/sqm: 638

2014 Q4 Van Uden Distribution Centre 44,143sqm

Waddinxveen

Vendor: Unknown

Purchaser: Delin Capital

Asset Management

(DCAM)

Amount: EUR 38.0m

Yield: N/A

EUR/sqm: 861

2014 Q4 Lage Weide Distribution

Centre

66,592sqm

Utrecht

Vendor: Somerset Real

Estate

Purchaser: USAA Realco

Amount: EUR 33.7m

Yield: NA

EUR/sqm: 506

13

The Real Estate Advisory Team

Disclaimer This document has been prepared by ABN AMRO, It is solely intended to provide financial and general information on economics. The information in this document is strictly

proprietary and is being supplied to you solely for your information. It may not (in whole or in part) be reproduced, distributed or passed to a third party or used for any other

purposes than stated above. This document is informative in nature and does not constitute an offer of securities to the public, nor a solicitation to make such an offer.

No reliance may be placed for any purposes whatsoever on the information, opinions, forecasts and assumptions contained in the document or on its completeness, accuracy or

fairness. No representation or warranty, express or implied, is given by or on behalf of ABN AMRO, or any of its directors, officers, agents, affiliates, group companies, or

employees as to the accuracy or completeness of the information contained in this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of

such information. The views and opinions expressed herein may be subject to change at any given time and ABN AMRO is under no obligation to update the information contained

in this document after the date thereof.

Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your

investments activities may encounter under applicable laws and regulations. If, after reading this document, you consider investing in a product, you are advised to discuss such an

investment with your relationship manager or personal advisor and check whether the relevant product –considering the risks involved- is appropriate within your investment

activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO reserves the right to make amendments to this material.

© Copyright 2014 ABN AMRO Bank N.V. and affiliated companies ("ABN AMRO")

Erik Steinmaier

Head of Real Estate Advisory

+ 31 20 343 64 19

[email protected]

Andy Kloppenburg

Director

+ 31 20 383 92 78

[email protected]

Steven Vlek

Senior Associate

+ 31 20 383 51 45

[email protected]

abn amro real estate market update 2015 q1

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