Investing in Norway from an International
international
Real Estate Market Perspective
Chris Staveley
9th February 2012
Akershus Eiendom: international cooperation
 Akershus Eiendom has had a formal cooperation
agreement for 10 years with Jones Lang LaSalle as
its sole partner in Norway since the agreement was
signed in 2001
 The cooperation agreement includes transactions,
corporate solution services for key clients, research
and valuation
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acquisitions and finance transactions since
2006, of which over 40% have been cross
border
 Unique relationships with active sellers and
buyers across the globe through the
International Capital Group
2
European Commercial Real Estate Demand is Global
83.5
2011: €bn
9.1
3.4
Equity rich investors (e.g. Canadian and
US pension funds) from the Americas
have become increasingly active across
Europe in 2011
Capital Sources
European
International
Europe
Americas
Middle East
Asia Pacific
Global
2.8
13.9
2011 (€bn)
% Change YoY
87.1
31.6
+4%
+57%
100
75
50
% 25
0
-25
-50
YoY growth in capital inflows
Americas Asia Pacific
Global Sources of Funds
MENA
Sharp increase in capital
flows from outside Europe
NB: Other geographies or unknown capital accounted to EUR 5.8 billion
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, January 2012
3
European Transaction Activity 2011
European Investment Volumes (all commercial sectors, EUR bn)
2011 Volume by sector
Other
14%
3.8
 1%
Retail
33%
36.8
3.2
 32%
21
25
20
11
15
10
5
12
4
7
7
6
9
12
11
12
12
11
14
9
18
16
16
12
14
12
19
16.1

30
-45%
5.8
2.4
2.2
0.6
1.6
1.8
12
 108%
 29%
22.8
1.8
Cross-border
Domestic
Qtrly Average
35
 17%
1.9
EUR bn
40
1.6
8.4
TOTAL EUR 118.7 bn

Office
44%
Industrial
8%
 35%
 6%
-2%
3.7
0.5
17
Circles: € billions traded in full year 2011
% change 2010 vs. 2011
Q1
2
00
Q2 9
20
0
Q3 9
20
0
Q4 9
20
0
Q1 9
20
1
Q2 0
20
1
Q3 0
20
1
Q4 0
20
1
Q1 0
20
1
Q2 1
20
1
Q3 1
20
1
Q4 1
20
11
0
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, January 2012
4
New Capital Sources in the European Market
€268m
1 Kingdom Street*
Polish Telecoms*
London, UK
Cityhold Property AB
Group (Sweden)
Warsaw, Poland
Qatar Holding (Qatar)
€135m
Aviva Tower*
Olympia*
London, UK
Private (Indonesian)
Brno, Czech Republic
ECE and NPS
(Germany and South
Korea)
€262.5m
€326
Regent St Estate*
(25%)
€550m
PEP*
London, UK
NBIM (Norway)
€400m
Hotel de Crillon*
20 Columbus
Courtyard*
€180m
€168m
Munich, Germany
TIAA-CREF
(USA)
London, UK
M1 (Lebanon)
€250m
Paris, France
Royal Family
(Saudi Arabia)
11-12 St James*
O’Parinor (51%)*
London, UK
MEPF (Malaysia)
Paris, France
NPS (South Korea)
* Jones Lang LaSalle advised
€223m
5
Investment in the Nordics has been strengthening
Nordic Market Share
Quarterly volumes
€ bn
Nordics increasing their
market share – the
market was a similar size
to France in 2011
Quarterly Average
12
BeneluxOther Europe
2%
S. Europe 4%
UK
31%
5%
CEE & Russia
11%
10
Nordics
13%
8
6
11
10
4
2
8
8
5
4
5
5
6
4
4
6
3
1
2
2
3
3
2
2
5
2
5
3
Q1
0
Q2 6
0
Q3 6
0
Q4 6
0
Q1 6
0
Q2 7
0
Q3 7
0
Q4 7
0
Q1 7
0
Q2 8
0
Q3 8
0
Q4 8
0
Q1 8
0
Q2 9
0
Q3 9
0
Q4 9
0
Q1 9
1
Q2 0
1
Q3 0
1
Q4 0
1
Q1 0
1
Q2 1
1
Q3 1
1
Q4 1
11
0
Germany
19%
France
14%
Source: Jones Lang LaSalle; Akershus Eiendom (Norway) Sadolin & Albaek (Denmark), January 2012
6
Domestic Purchasers Drive the Nordic Markets in 2011
100
As highly liquid markets, the dominance of domestic investors in Sweden and Norway
illustrates the level of wealth within the countries
Market Share (%)
75
50
25
0
Norway
Domestic
Sweden
Finland
France
Germany
Denmark
Europe Average
UK
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, IHS Global Insight Jan 2012
7
Where Real Estate capital wants to invest 2012
INCREASE IN INVESTMENT
FLAT
DECREASE IN INVESTMENT
UK – remains attractive as
a highly liquid market and
a perceived “safe haven”
sitting outside the €zone
NORDICS – investors
like the Nordics
because their better
than average
economic outlook
RUSSIA – positive long
term growth trend will
attract more international
capital into the market
GERMANY – investors
attracted to the stability
offered by the economy
FRANCE –Strong recovery
since 2009 but volumes
could fall after deals were
brought forward to take
advantage of the tax
incentive
CEE – continued growth will
attract investors with some
appetite for risk; activity will
be driven by availability of
product
SOUTHERN EUROPE – High levels of
investor caution; some interest from
opportunity funds but pricing will have
to adjust further
Source: Jones Lang LaSalle
8
Countries with Stronger Outlook will attract Capital
Net Growth in Investment in 2011 (€bn)
Change in Vol. (€bn)
7
6
GDP Growth p.a (%)
4
Change in Volumes (2010 vs. 2011)
3.5
GDP Annual Growth (2012-15)
6.2
5.1
5
3
3.9
4
2.9
3
2.5
2
2
0.4
1
0
-1.9
1.5
1
-1
0.5
-2
-3
0
CEE & Russia
Germany
France
Nordics
UK
Southern Europe
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, Oxford Economics, Global Insight Jan 2012
9
European Office Property Clock Q4 2011
The Jones Lang LaSalle Property ClocksSM
Note
This diagram illustrates where
Jones Lang LaSalle estimate each
prime office market is within its
individual rental cycle as at end of
December 2011
London City, London West End,
Paris, Zurich
Oslo
Moscow
Helsinki
Rental Growth
Slowing
Rents
Falling
Warsaw
Düsseldorf, Geneva, Stockholm
Berlin, Hamburg, Munich
Lyon, Stuttgart
Cologne
Copenhagen
Milan
St. Petersburg
Source: Jones Lang LaSalle IP, January 2012
Rental Growth
Accelerating
Rents
Bottoming Out
Markets can move around the clock
at different speeds and directions
The diagram is a convenient
method of comparing the relative
position of markets in their rental
cycle
Their position is not necessarily
representative of investment or
development market prospects.
Their position refers to Prime Face
Rental Values
Athens
Lisbon
Barcelona, Brussels
Amsterdam, Budapest,
Dublin, Madrid
Edinburgh, Rome
Bucharest, Frankfurt, Istanbul,
Kiev, Luxembourg, Prague
10
Office Rental Trend is Strong in Nordic Markets…
Prime Office Rental Change Q4 2010 – Q4 2011
Moscow
Oslo
Warsaw
Paris
London WE
Helsinki
Copenhagen
Stockholm
Hamburg
Munich
Milan
London City
Amsterdam
Frankfurt
Prague
Madrid
Dublin
-15
-10
-5
0
5
10
Source: Jones Lang LaSalle; Akershus Eiendom (Norway), January 2012
15
20
25
30
35
40
45
% change
11
Ba
rce
lo n
a
Ma
dr
id
Fr
a
Lo nkfu
r
nd
on t
Am City
ste
rd
am
Br
us
se
ls
Be
rlin
Mi
lan
Mu
n ic
h
W
ar
s
Pa aw
ris
CB
D
Pa Ham
ris
bu
La
r
Dé g
fen
se
St
oc
Lo
k
nd
on holm
W
es
ten
d
Pa
ris
Ge
ne
va
Zu
r ic
h
Os
lo
Q4 2011 Office Capital Value/m2 vs.10-year Average
(local currency in 2011 prices)
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
12
Domestic Dominance but Very Liquid Markets
Direct RE Investment per capita: 2011
Sweden
Norway
UK
Finland
Germany
France
Netherlands
Poland
Italy
Russia
Spain
Ireland
Portugal
0
100
200
300
600
500
400
Investment per Capita (EUR)
700
800
900
1000
Source: Jones Lang LaSalle; Property Data (UK); Akershus Eiendom (Norway), Athens Economics (Greece), Sadolin & Albaek (Denmark), RCA Analytics, IHS Global Insight Jan 2012
* Central London investment volumes includes offices only
13
The Norwegian Market has High Levels of Transparency
1.0
1.5
2.0
United Kingdom, Sweden, Ireland, France, Netherlands Germany, Belgium,
Denmark
Finland, Spain, Austria,
Portugal, Switzerland, Italy, Poland
NORWAY
Highest
High
South Africa, Czech Republic Hungary, Israel
2.5
3.0
Greece, Slovakia, Russia (Tier 1-2 Cities)
Romania, Turkey
Semi
Bulgaria, Russia (Tier 3 Cities), Ukraine, Slovenia
3.5
Croatia, Kazakhstan
Low
4.0
Belarus
4.5
5.0
Opaque
Source: Jones Lang LaSalle, LaSalle Investment Management
14
Oslo Prime Yields becoming more Aligned with Europe
Prime Yield %
11.0
Current Prime Yield
10 Year Average
10.0
20 Year Average
Oslo
Europe*
5.25%
5.71%
6.75%
5.27
5.42
5.62
9.0
8.0
7.0
Prime yields in Oslo are in line with
a weighted European average but
are sitting well below the long-term
average
20 Year Average
6.0
20 Year Average
5.0
4.0
Oslo
Europe
1992
1994
3.0
1990
1996
1998
2000
2002
2004
2006
2008
2010
Source: Jones Lang LaSalle; Akershus Eiendom (Norway), January 2012
* Yield is weighted
15
Rental Forecasts Strongly suggest Outperformance in Oslo
2012-2013
% p.a.
Over-performers
% p.a.
Under-performers
London – City
7.0
Utrecht
0.4
Warsaw
5.6
Luxembourg
0.4
Edinburgh
5.4
The Hague
0.0
Moscow
5.1
Dusseldorf
0.0
Oslo
5.0
Brussels
0.0
Source: Jones Lang LaSalle, December 2011
16
Norwegian Economic Outlook is Positive
Norway GDP growth looks set to outperform
Higher GDP growth than Europe in 2012:
•
we forecast + 2.3% vs. + 0.2% in the EU-27
unemployment is one of the lowest in Europe
While inflation is under control:
•
inflation is anticipated to remain below target
Annual Average Growth 2012-16
Better labour market in Norway:
•
3.5%
Over 2012-2016 Norway’s average
annual growth outperforms other
major European economies
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Norway
4.0
Forecast
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
UK
Sweden Denmark Germany France
Unemployment expected to remain low
ILO Umemployment Rate (%)
Consumer Price Index Annual Growth (%)
Norwegian inflation forecast to remain below target
Finland
10
Forecast
9
8
7
Finland
UK
Sweden
Germany
6
5
4
Norway
3
2
1
0
2006
2007
Source: Oxford Economics
2009
2009
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2015
2016
17
% point spread over German 10 year bunds
Norwegian Bonds relatively stable against German bunds
5
4.5
4
J
First
3.5 bail-out in
3
2.5
2
1.5
1
0.5
0
Jan-10
Apr-10
Source: Datastream; February 2012
Jul-10
UK
Oct-10
Spain
Jan-11
Apr-11
France
Jul-11
Oct-11
Jan-12
Norway
Source: Datastream; February 2012
18
Sovereign Debt, not an issue for Norway
Government Total Debt as % of GDP 2011
Developed Countries – Total Government debt and fiscal balance as a % of GDP
180
160
Greece
140
120
Italy
USA
Ireland
100
Portugal
France
80
UK
60
40
Belgium
Germany
Austria
Netherlands
Turkey Finland
Czech Rep
Denmark
Hungary
Spain
Iceland
20
China
Switzerland
Sweden
Norway
Luxembourg
0
-15
-10
Source: Global Insight, November 2011
-5
0
5
10
15
Government Fiscal Balance % GDP 2011
19
14
-2
Piraeus
EFG Eurobank
NBG
KBC Bank
Credit Suisse
Alpha Bank
Credit Agricole
BCP
Commerzbank
Deutsche Bank
Banco
UBS
BMPS
Lloyds
SocGen
UBI Banca
HSBC
Banco Sabadell
BBVA
BNP Paribas
Barclays
Bankinter
Banco Popular
RBS
Santander
Danske Bank
Intesa
DnB NOR
Nordea Bank
Swedbank
SEB
Handelsbanken
Nordic Regions’ Banks’ Tier 1 capital ratios healthy
%
12
Nordic banks are the most well
capitalised in Europe and will have
more scope for lending activity
10
8
6
4
2
0
Source: Bank of America Merrill Lynch Equity Research
20
Strong Capital Base will support Norwegian Market…
Top 10 Global Sovereign Wealth Funds
ADIA - UAE
SAFE - China
Govn PF - Norway
SAMA - Saudi Arabia
CIC - China
KIA - Kuwait
HK Monetary Authority - China
Govn of Singapore Inv. Corp
Temasek Holdings - Singapore
Nat. Social Security Fund - China
Total Assets (US$bn)
0
100
200
300
400
500
600
700
Source: www.swfinstitute.org
21
… and Population Growth in Norway and Oslo Region
is Strong
Population Growth Forecasts
Norway
Annual Population Growth Index (2005=100)
130
Forecast
Oslo
125
+27%
Stockholm
120
115
110
105
London
+18%
Paris
+13%
European
Union
+7%
+3%
100
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
95
Source: Oxford Economics; December 2011
22
Investing in Norway – International Perspective
•
European real estate demand is global
•
Nordic investment is relatively strong – but highly domestic
•
Norwegian market has strong prospects and will attract new
capital sources
•
Norwegian economic backdrop is very robust – should increase
the relative attractiveness of the market
•
Perception of a lack of liquidity – not necessarily real
•
Domestic competition and transaction speed are barriers
•
A market too far for regional funds? – Should not be the case
23
Takk!
Chris Staveley
International Director
European Capital Markets
London
+44 (0) 20 7399 5340
chris.staveley@eu.jll.com
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24