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 Jones Lang LaSalle: Our Global Capital Markets Platform Combining the in-depth local knowledge of over 1,300 investment and corporate finance professionals based in 209 offices around the world Completed over $300 billion of sales, 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 This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Jones Lang LaSalle IP, Inc. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication. 24