Full Interactive: CBRE Real State Report 2009

CBRE Real State Report 2009

  1. REAL ESTATE REPORT 2009 TRENDS 2009

  3. TRENDS 2009 REAL ESTATE REPORT

  4. OFFICES IN SPAIN CB RIChARd EllIS S.A. MAdRId PAlMA dE MAllORCA Edificio Torre Picasso Avda. Comte de Sallent, 2 Plantas 24 y 27 Esquina 31 de diciembre Plaza Pablo Ruiz Picasso, 1 07003 Palma de Mallorca 28020 Madrid Tel.: +34 971 45 67 68 Tel.: +34 91 598 19 00 Fax: +34 971 45 68 98 Fax: +34 91 556 96 90 mallorca@cbre.com madrid@cbre.com MÁlAgA BARCElONA Edificio Málaga Plaza Edificio Testa Diagonal Don Cristián, 2-4 Avda. Diagonal, 605, 8º-1ª Planta 1ª, ofic. 2 08028 Barcelona 29007 Málaga Tel.: +34 93 444 77 00 Tel.: +34 95 207 07 10 Fax: +34 93 419 02 85 Fax: +34 95 207 17 05 barcelona@cbre.com malaga@cbre.com VAlENCIA MARBEllA Paseo de la Alameda, 35 bis Edificio Golden 3º dcha. Avda. Ricardo Soriano, 72 46023 Valencia Planta 1ª Tel.: +34 96 316 28 90 29600 Marbella Fax: +34 96 316 28 91 Tel.: +34 95 276 51 30 valencia@cbre.com Fax: +34 95 276 58 30 marbella@cbre.com ZARAgOZA Paseo de la Independencia, CASABlANCA 21, 1º centro (MOROCCO) 50001 Zaragoza 93, Boulevard Al Massira Tel.: +34 976 48 46 35 Al Khadna, 1 er étage Fax: +34 976 48 46 33 20000 Casablanca zaragoza@cbre.com Marruecos Tel.: +212 (0) 22953250 Fax.: +212 (0) 22364238 casablanca@cbre.com 4

  5. INTROdUCTION page 8 1 gUEST WRITER: NORMAN FOSTER page 12 2 INTERNATIONAl MARkETS page 22 3 page 50 SUSTAINABlE ARChITECTURE 4 SUSTAINABIlITY & ENERgY page 60 BAROMETER 5 7 page 100 INVESTORS ANd FINANCIAl ENTITIES page 70 6 MARkET TRENdS page 84 Trends 2009 5

  6. IN SEARCh OF REFERENCE POINTS EdITORIAl SERgIO ACEREdA Director of Marketing and Communications CB Richard Ellis Spain 6 FIRMAS A sustainable approach can provide the decisive push

  7. A year has passed since the change The financial turmoil of the At present, its not just a in the market that we warned about summer of 2007 and the onset matter of one particular real in this very report. It is evident the of the sub-prime mortgage crisis estate business model, or one situation has worsened since then. have spread like wildfire. The particular way of banking. endless succession of bad news For better or worse, today a Were probably right in the middle has resulted in a global crisis large part of the prevailing of a predigious event, with a gloomy that threatens to infect the socioeconomic model of the last outlook and uncertain times in the whole of what economists call few decades is in question. distance, as far as the eye can see. the real economy. At this juncture, an approach That being the case, we find that looks towards Sustainability ourselves stuck in the middle. as a central reference point We grit our teeth, and ask can provide the decisive ourselves, how did we get into impetus. A way of improving this mess? But we still dont our physical, environmental very well know either where and economic surroundings were headed or why, nor when little by little; of contributing, well arrive at that uncertain from the smallest amount to the destination. There are times largest, each according to his or when its perhaps more useful her responsibility, to better the to ask good questions than to conditions in which we live and have an answer ready. We need work. Of improving, in short, points of reference. the way in which society is organised. Were in transition. The magnitude of the cataclysm Based on that foundation, is such that, both in political the report you hold in your and social as well, of course, hands serves a dual purpose: as in economic terms, things on the one hand, to shed light have already begun to change. on the field of sustainable Trends 2009 represents an development; on the other hand, attempt to present forward- to show our clients vision, looking approaches in the fields the practical application of the of city planning, architecture, ideas and projects set in motion investments, business and setting the best example for and markets. facing the future realistically but also with hope and optimism. Without wanting to be dogmatic about it, we believe that Sustainability can constitute a central element of this necessary change. Sustainability in terms of the way in which we plan our cities and businesses; in terms of business plans and growth strategies; in terms of the environment. Sustainability such that what we do now does not drastically affect future generations. Trends rends 2009 7 A sustainable approach can provide the decisive push

  8. COMMON SENSE. SOCIAl SENSE. SENSE OF hUMOUR In the general elections of 1977 my father stood as candidate for the senate representing the UCD (Union de Centro Democrático) under the slogan of Common Sense, Social Sense. INTROdUCTION EdUARdO FERNÁNdEZ-CUESTA President CB Richard Ellis Spain 8 INTROdUCTION The variable salary of the companies mentioned above will be based on the ability to generate mid to long-term sustainable profit

  9. above will be based on the ability to generate mid to long- term sustainable profit. Past situation B. Some businesses failed to produce business plans, or they were unclear or not very realistic. Some did not have alternative plans of actions to deal with any sudden change in the market. Trend B. Business plans will be very transparent, realistic and based on painstaking studies of cash flow, and have a mid to long-term perspective. Past situation C. Some managers did not have the qualifications or humility necessary to carry out their responsibilities with all the guarantees in place. Trend C. In the future we shall see more well prepared professionals who are able to manage teams and who are responsible, efficient individuals with a mid to long-term view. BUSINESS PlANS WIll BE VERY TRANSPARENT, REAlISTIC ANd BASEd ON PAINSTAkINg STUdIES When I put pen to paper to currently find ourselves, and OF CASh FlOW, ANd hAVE A MId try to analyse my thoughts how I believe and hope that TO lONg-TERM PERSPECTIVE on the future trends to come these qualities will help over the next few years with us to get through these regard to the evolution of the difficult times. property market, and perhaps in the Spanish economy and COMMON SENSE in society, I remembered the Past situation A. The variable expression Common Sense, remuneration of some of Social Sense, and I would add a the managers of financial third: Sense of Humour. institutions, venture capital In this introduction I shall try companies, funds etc, was to explain with some basic based on the turnover or examples how the failure to volume of the business. apply these three virtues has Trend A. The variable salary put us in the situation that we of the companies mentioned The variable salary of the companies mentioned above will be based on the ability to generate mid to long-term sustainable profit Trends 2009 9

  10. EdUARdO COMMON SENSE. SOCIAl FERNÁNdEZ-CUESTA SENSE. SENSE OF hUMOUR President CB Richard Ellis Spain Past situation E. Opportunism, improvisation, wastefulness and the selfish, biased, blinkered view of a minority of the political class has left some of the structural problems of our country unresolved. Trend E. A civil society will react and demand that the politicians find solutions based on an educated, economic and social model that is sustainable, integrative, coherent and responsible. It would seem that American society has taken in a breath of pure, fresh air. Here in Spain we need leaders who can give a sense of truth to the words of democracy, freedom, opportunity and hope, which are the axis of Obamas political arguments SENSE OF hUMOUR Past situation F. The culture of money, the law of minimum ThE gOAlS OF ThE WORkER SOCIAl SENSE effort, the lack of values, the ANd ThE BUSINESSMAN WIll Past situation D. ASome lack of family support are, at BE BASEd ON BOTh ThE qUAlITY ethical and deontological times, elements that contribute OF ThEIR WORk ANd ON norms faded into the to accentuating the economic kEEPINg ClIENTS background and personal crisis. We have seen clear gain became one of the examples of these all around fundamental driving forces the world in recent years. behind some companies and (Including in our employees. own country) Trend D. The worker and Trend F. We shall once again the businessman alike will value the importance of the have to contribute to the little things that make us sustainable success of the laugh and that we enjoy. company, and the maxims of their operations will be based on both the quality of their work and on keeping clients. 10 INTROdUCTION We will recover from this crisis little by little, step by step

  11. INTROdUCTION The family will once again should act conscientiously, become a solid, irreplaceable, professionally and with a refuge that passes on values. true sense of State, offering We will learn to see our intelligent solutions which theoretical successes and allow us to compete failures in context and more successfully with the other relatively; and we will face economies around us. up to life with an added touch I believe that if we apply the of humour. three senses that have guided this article we will be moving IN CONClUSION in the right direction. We Yes, there is a crisis. It is should keep our hopes and important. It will be studied by dreams alive, be optimistic and our children and grandchildren believe that a crisis brings with as the crash of October 2008. it a fantastic opportunity, which Positive message: The economic is truer now than it has crisis will end and another ever been. period of boom will come. My opinion is that we will recover from this crisis little by little, step by step, but recovery will not happen at the same time or with the same intensity in all countries or companies. I believe we all need to do our homework, and to do it properly. Individuals and families have to draw up a business plan and establish their mid and long-term objectives. We should try to control and influence our destiny and fight to reach our goals. Companies should draw up solid, stable plans; plans that balance the interests of the workers, clients and shareholders. Political, social and economic institutions We will recover from this crisis little by little, step by step Trends 2009 11

  12. guest writer The leading architect and president of Foster & Partners, Norman Foster, explains the Masdar City initiative, in Abu Dhabi, which is unique in its development of alternative energy which improve the environment. 12

  13. guest writer 1 Trends 2009 13

  14. Masdar: the City of the future Like many Middle-Eastern states, Abu Dhabi built its modern economy on oil production. However, it is unique in the region in recognising that we must develop alternative energy models if we are to reduce the environmental impact of our contemporary lifestyles. The Masdar Initiative in Abu Dhabi was established in order to promote renewable energy solutions through research and development and to create a model for future energy security NorMaN foster within a wholly sustainable Photograph taken by Carolyn Djanogly President framework. Foster & Partners Masdar has far reaching significance in global terms, in that it tackles design in a holistic sense. It is not specific in terms of individual buildings, important though they may be. Instead it looks at the bigger picture. If energy consumption is a consequence of demand, then you could argue that demand is a consequence of design and that everything in our world 14 guest writer You cannot divorce the issue of energy from architecture and urban planning

  15. is the result of a conscious act of design. In that sense, you cannot divorce the issue of energy from architecture and urban planning. But really architecture comes down to buildings, and urban planning comes down to infrastructure. Those two elements are normally considered separately, but Masdar brings them together as its central thesis and you can only do that at the level of community planning. That is what makes Masdar so critically important and progressive in a global context. and its redistribution, it is Masdar has far reaChiNg urbaNisatioN also important to note that sigNifiCaNCe iN global Another way of describing this that process of urbanisation is terMs, iN that it taCkles process is urbanisation. If we changing rapidly. Today, more desigN iN a holistiC seNse look at what urbanisation really people live in cities than in the means, in an industrialised whole history of civilisation society, and look at energy and that pattern is accelerating. consumption, you find that What took 200 years in Europe transport represents some or North America is now taking questions: what are the models 35 per cent of the total and twenty years in countries such for these new cities; and how do buildings 44 per cent. There is as China acceleration by a we adapt existing communities a critical interaction between factor of ten. It was not that to accommodate rising the two in design terms. As long ago, in 1939, that London populations? we look at global population was the most populous city in First, as an optimist, I would say the world, with a population that to believe in a sustainable of 8.6 million, but it has been future is to trust that it will overtaken by a number of result in a better world. The mega-cities around the world, city of the future has to be with populations in excess of more attractive place in which 15 million. That raises several to live and work. If Masdar or You cannot divorce the issue of energy from architecture and urban planning Trends 2009 15

  16. Masdar: the City NorMaN foster of the future President Foster & Partners any sustainable initiative does invented and that we can only not result in a great place to be, dream about now. if it isnt a city that you really want to live in or visit, if it eNviroNMeNtal beNefit does not lift the spirits, then it It would be wrong, however, is not fulfilling a central part to focus wholly on technology of its function. Second, to be in this context. There is a very sustainable, we have to build simple pyramid diagram that for the long term. Flexibility is says the biggest environmental a key consideration. Masdar is gain really comes from the least being planned in 2008 and will financial investment: it rests be finished in 2018, so it has on primary decisions about the to be able to respond to new citys orientation and form. This technologies that will have an is equally true of the buildings impact on the way we live in that separately comprise the city. the next ten years and beyond As you move closer to the apex things which have yet to be of the pyramid to more active controls the environmental gains reduce. However, somewhere in the middle through passive controls such as responsive shading, the use of daylight and natural ventilation, you will find very good value for money. Currently the smaller contributions for the higher cost are coming from emerging systems such as photovoltaics. 16 guest writer There is a very simple pyramid diagram that says the biggest environmental gain really comes from the least financial investment

  17. there is a CruCial relatioNship iN urbaN terMs betweeN eNergy CoNsuMptioN aNd deNsity That situation will change of eNergy aNd course. In five or ten years this populatioN deNsity diagram may very likely be There is a crucial relationship described in different terms. in urban terms between energy consumption and density. The traNsport lowest density cities, those However, even if we could that sprawl, are huge per is very high density, also reach the point where we capita energy consumers. At sustains one of the most affluent could design a building that the other end of the scale, very communities in the world, even consumed zero energy, we high density cities have low if a significant proportion of its would still have a problem. levels of energy consumption. residences are second homes. This is because we also have to Somewhere in the middle there You could polarise it and say look at transport. If you analyse is an interesting balance a city that there are traditional cities that energy figure of 35 per cent, that is high density, economical that have taken 1,000 years to you find that a large majority and civilised. That city has a evolve and newer cities that of it some 26 per cent of the mixture of uses; it is socially are perhaps less than 100 years energy total is consumed diverse; people live and work old roughly the same age by people commuting on a in the same environment; it is as the car. What can we learn daily basis. Add that to the 44 well served by public transport from these models? If you take per cent figure for buildings and the pedestrian experience and you see that some 70 per is enjoyable. Such cities cent of all the energy we use Zurich, Geneva, Copenhagen is accounted for by the daily become destinations or tourist interaction between buildings attractions. In any quality-of-life and transport systems. survey they come out on top. Obviously we have to look at Interestingly, Hong Kong, one this pattern of consumption in of the highest density cities, an integrated way if we are to has the greatest life expectancy shrink that figure. (There are of any city. Monaco, which complicating factors at play too: you can have a beautifully designed car that operates on a thimble full of petrol, but you can still be stuck in a traffic jam.) There is a very simple pyramid diagram that says the biggest environmental gain really comes from the least financial investment Trends 2009 17

  18. Masdar: the City NorMaN foster of the future President Foster & Partners a new city like Detroit and compare it with an old one like Copenhagen, you find that the old is twice the density of the new, and the difference in fuel consumption is a factor climate, in any country in the of ten. You also have to factor world would be a challenge. in the quality of life in terms In a desert environment it is of downtown Detroit and especially demanding I have downtown Copenhagen. likened this to the challenge in Interestingly, if you look at the past of putting a man on densities you find that Monaco the moon. has just over 16,000 people Masdar covers a site of 700 per square km; Hong Kong has hectares, will have a population 17,000. The most desirable of 90,000, and be constructed areas of London Mayfair, in several phases over the next Chelsea, Knightsbridge are of ten years. The starting point remarkably similar densities. was to look at traditional Arab Yet, if one says that the answer settlements, which invariably is high density, people tend to are quite compact and oriented assume that they are going to so that the buildings provide have to make sacrifices, that it is shade and channel cooling air a poverty driven future scenario. currents. The way in which That is why it is critical to learn shading can be used, and the lessons from the past. Look quality of the public spaces is at the most desirable areas of obviously a fundamental design London and you find that they decision and has a significant are built to higher densities than impact on energy consumption. the poorer parts of the city and The city is completely significantly higher than typical integrated there are no modern developments. People separate zones for industry or that live there have access to culture. The university and public transport; they can walk traditional business elements to a restaurant or theatre; there are embedded in the heart are parks and generous public of the community, as are spaces. These attributes have entertainment and leisure a value, which is reflected in facilities. Weaving through the property prices. city is a green ribbon that links to small parks and squares. Zero eMissioNs The ambition of Masdar is to create a high-density, welcoming, enjoyable community that is also carbon neutral and produces zero waste. To do that in any 18 guest writer The land immediately surrounding the city will be used to farm renewable energy

  19. be capable of retrofitting and change over time, just as the avionics in an aircraft can be changed, even though the air frame remains the same. To the south of the city, desert winds will drive turbines to provide additional power. Evacuated thermal tubes will be integrated into buildings Living and working there, you to provide hot water; and the will find everything you need feasibility of a deep geothermal close at hand. hot rock borehole is being evaluated to provide a constant reNewable eNergy source of high-temperature The land immediately water or steam to drive a system surrounding the city will be that will provide twenty-four- used to farm renewable energy hour cooling. Throughout for use by the community and the city, waste streams will this organisation will produce a be segregated and recycled. carbon-neutral balance over the Applicable waste streams will year. The city relies on a range be composted and the product of renewable energy strategies, used to fertilise the surrounding including the extensive use of plantations. The remaining photovoltaic technology and a concentrated solar power farm, both to provide power during the construction phase and over the citys lifetime. Every roof and shading element will be fitted with photovoltaic panels to harvest energy and those will Masdar Covers a site of 700 heCtares, will have a populatioN of 90,000 aNd be CoNstruCted iN several phases over the Next teN years The land immediately surrounding the city will be used to farm renewable energy Trends 2009 19

  20. Masdar: the City NorMaN foster of the future President Foster & Partners waste will be employed in a waste-to-energy plant to provide supplementary power. The plantations that edge the city also form a landscape barrier which provides a natural filter against sand storms, which occur frequently in the region. In the spring and early summer, the climate in Abu Dhabi is generally very pleasant. Yet at the height of the summer it can be uncomfortably hot. Out in the open, where there is no shade, the temperature can reach 60 to 70 degrees Celsius. However, if you look at some of the vernacular architectural devices such as colonnades, whose shadowy recesses offer respite from the sun you find that the temperature drops quite dramatically, down to a more bearable 50 degrees. If you go further and introduce planting, green canopies and water you not only help to 20 guest writer What makes Masdar especially significant is the fact that it offers a blueprint for the sustainable twenty-first century city

  21. lift the spirits, but you see iN terMs of sCale further drops in temperature. aNd deNsity, Masdar Other vernacular devices, such as thermal chimneys, is CoMparable with which encourage cooling air veNiCe, whiCh is also currents, can also help to a Car-free City modify the microclimate. All of these devices have been reinterpreted in modern terms and put to work in Masdar to create a comprehensive system of passive climate control. Cumulatively, they have the effect of prolonging the moderate season in the city. goods, waste collection and passive CliMate infrastructure distribution, CoNtrol which means that at street Interestingly in terms of its level pedestrians have absolute scale and density, Masdar priority. The PRT stations are is comparable with Venice, distributed evenly across the which is also a car-free city. city to ensure that the maximum In Masdar the car and all walking distance between stops carbon-based transport is left is an easy 150 metres; and the sustaiNability iN at the city boundaries; within shaded streets and walkways the xxi CeNtury it you travel by elevated light encourage you to walk. Shifting focus yet further, railway or use one of the Importantly, Masdar is what makes Masdar especially specially designed personal strategically located close to significant is the fact that rapid transport (PRT) vehicles, the international airport and it offers a blueprint for the which use power generated linked to the principal transport sustainable twenty-first century by photovoltaic installations. infrastructure as well as the city, not just in Abu Dhabi or These vehicles will provide proposed high-speed coastal the Middle East but worldwide. the convenience of the private rail links and local light-rail Crucially, its design springs car or the taxi, the difference links to Abu Dhabi city and Al from the recognition that to being that they are driverless Raha beach. All of which means survive, we have to change, and and fully automated, directed it will be possible to get to and that with change can come a by an intelligent control system from the city without relying better way of life. Imagine such to take the quickest route on your car the bigger a city in an American, European between locations. Anticipating picture again. or Far Eastern context and while future technology it is hoped it might be physically different that passengers will be able its underlying philosophy to call up the service on their would be the same. It is a classic mobile phones and expect it example of the need to think in minutes. The PRT network globally and act locally; and is located at a lower level, never has that imperative been along with the distribution of more appropriate than today. What makes Masdar especially significant is the fact that it offers a blueprint for the sustainable twenty-first century city Trends 2009 21

  22. The sub-prime mortgage crisis in the USA has given rise to economic recession in the majority of countries, and the changes in the finance markets have affected the European commercial real estate market. INTER NATIONAL MARKETS 22

  23. 2 INTER NATIONAL MARKETS Trends 2009 23

  24. EUROPEAN The US sub-prime PROPERTY DAWN crisis of last summer has evolved into a wider global credit OF A NEW ERA? squeeze, which in turn now looks set to trigger an economic recession across much of Europe, if not the globe. FROM WALL STREET TO LE HIgH STREET. At the time of writing late October 2008 the outlook remains volatile and unclear. However, what seems certain is that the dramatic changes we have seen in the financial markets are having and will continue to have significant impacts on the commercial property market in Europe. These impacts are being seen in a number of areas, including investment transaction volumes and pricing, a direct impact on occupational demand from financial services occupiers; and NIcK AxFORD the more diverse impacts of a broader economic slowdown. Executive Director Head of Research & Consulting THE IMPAcT ON CB Richard Ellis EMEA INvESTMENT vOLUMES (Europe, Middle East and Africa) First, there has been an impact on property investment activity and pricing. As Fig 1 shows, the volume of investment transactions across Europe has fallen dramatically. Having averaged over 60 billion per quarter in 2006 and 2007, the last two quarters have seen less than half this volume. This 24 INTERNATIONAL MARKETS The volume of investment transactions across Europe has fallen dramatically

  25. reduction in activity is itself a Figure 1. Investment market turnover in Europe. function of a number of factors. Over the last two years, much of 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 the investment activity seen in Q1 06 Europe was financed with debt Q2 06 often at loan-to-value ratios of Q3 06 85% or more. The changes in Q4 06 the wider capital markets mean Q1 07 that debt finance has become progressively more difficult to Q2 07 secure and more expensive. At Q3 07 the time of writing, there are Q4 07 only the earliest signs that the Q1 08 widespread bank bailouts are Q2 08 starting to free up the lending Q3 08 markets, and it seems likely that it will take some time for any m MILLION significant volumes of property QUARTERLY AvgE 2006-7 = m 60bN lending to reappear. As a result, Source: CB Richard Ellis, Property Data, VastGoedMarkt, KTI many of the debt-financed purchasers have been removed from the pool of potential buyers. to identify some 250 billion MANY OF THE DEbT-FINANcED Nevertheless, we see no real of capital being targeted at the PURcHASERS HAvE bEEN shortage of equity investors sector. This comprised the REMOvED FROM THE POOL looking to put money into the Sovereign Wealth Funds and market when they perceive German Open-ended Funds OF POTENTIAL bUYERS that the time is right. At the (SWF and GOEF, together beginning of 2008, we were able accounting for 60 billion) and other institutional investors, THE cHANgINg GOEFs that were expected to be property funds and listed INvESTOR bASE a major source of acquisitions property companies (with We still believe that there is in the short term, but this now around 190 of capital). Within significant equity that will be appears less likely. Sovereign the latter group are the shorter available for investment, but the funds have come under pressure term opportunity fund picture has changed somewhat from various directions: investors, with up to 30 bn in recent months. It was the previous investments into or more to spend. SWFs and particularly the the financial sector have The volume of investment transactions across Europe has fallen dramatically Trends 2009 25

  26. NIcK AxFORD EUROPEAN PROPERTY DAWN Executive Director Head of Research & Consulting OF A NEW ERA? CB Richard Ellis EMEA (Europe, Middle East and Africa) THE EUROPEAN investors were focused far more PROPERTY MARKET on capital preservation than on HAS bEEN achieving significant positive cHARAcTERISED returns. All this changed with bY INAcTIvITY the German governments purchases as it is of the short- unconditional guarantee of term opportunity funds looking all bank deposits at the start to acquire distressed assets at of October, which triggered a bargain prices in the hope of major outflow of funds from making a quick return. Both the OEFs into the now zero-risk groups believe that prices banking sector. Whilst there have further to fall not least were other factors involved, this because in most markets we proved costly, and their wider ultimately led to the temporary have not yet seen a significant investment portfolios have closure of a significant number volume of distressed sellers in fallen sharply in value along of the open-ended property the market. So where would with the equity markets. funds to prevent a disorderly such sellers come from? Moreover, many of the funds run of withdrawals. However, exist in order to invest surplus for the market as a whole, this SOURcES OF revenues from the sale of has suddenly turned the OEF INvESTMENT SALES natural resources notably oil, sector from a significant net The key feature of the credit the price of which has halved purchaser of European real crunch has been a reduction over the latter part of 2008 thus estate to potential sellers of in the volume of debt finance significantly reducing the level assets over the next 6 months. available, and an increase in of capital inflows. As a result, in Thus far, however, the its cost. Real estate investment the short term they will be less European property market has been a debt-intensive active in the property market has been characterised by business in recent years; the than initially envisaged. inactivity. Those investors who vast majority of transactions The GOEFs are also facing a are looking to take advantage utilise leverage to some degree, more challenging environment, of market conditions to buy and in some cases 90% or largely due to the actions of are in no rush to do so. They more of the finance might be their own government. After increasingly recognise that debt. Together with the open- the difficulties of 2005-6, the the equity they have at their ended investment funds (which open-ended property funds disposal is a rare commodity are vulnerable to outflows of had successfully restructured and may not be easy to replace equity), it is the more leveraged and regained the confidence once it is spent: the phrase investors that are likely to be of German investors such that keeping our powder dry is the source of distressed sales. by early 2007, they were once commonly used. This is just This is for two main reasons. again seeing strong inflows of as true of the long-term funds First, whether the debt is capital. These flows actually looking to make strategic private (more conventional accelerated as the credit crunch mortgage finance from banks) evolved, as German investors or public (securitised into sought the relative security of Commercial Mortgage Backed the asset-backed, stable returns Securities or other products and offered by the OEFs. The sold to a range of investors), sector was seen as a safe haven it will have conditions or during uncertain times, where covenants attached. The two 26 INTERNATIONAL MARKETS At the beginning of 2008, we calculated that there were some 250,000 million euros to be invested in the market

  27. crystallising a loss, and would probably reduce the values of other assets on which the bank had lent, potentially triggering most important relate to interest problems for other borrowers, rate (IR) coverage and loan to and so on. Where possible, it is value (LTV) ratio. If either of in the interests of both borrower these covenants are breached, and lender to renegotiate the the lender may require terms of the loan rather than repayment of the loan which undertake a sale. It has also in the current environment, been suggested that many where alternative finance is banks have other issues on unlikely to be available, will which they need to concentrate, usually trigger the sale of and thus for the moment at the property. Thus far, most least they have been willing breaches which have occurred to take a benign view of many have been of LTV covenants, technical breaches of banking as rising yields and falling covenants. It should also be values have caused technical noted, however, that depending breaches of the maximum on how the debt is structured, permitted loan to value ratio. CMBS lenders may have However, provided they have significantly less flexibility faith in the solvency of the in their approach to covenant borrower and the quality of the enforcement than traditional underlying asset, few lenders private lenders. would be likely to foreclose Breaches of interest coverage purely on this basis. Forcing conditions are viewed more sales of property in the current seriously, as they suggest a market may not realise the more direct potential threat full value of the loan, thereby to the ability of the borrower to repay the loan. However, such covenants tend to be breached as a result of tenants vacating a building (either through relocation or closure) which, whilst it may become more common as the current economic slowdown progresses, has been relatively uncommon to date. The second reason why leveraged buyers may be a source of sales is refinancing At the beginning of 2008, we calculated that there were some 250,000 million euros to be invested in the market Trends 2009 27

  28. NIcK AxFORD EUROPEAN PROPERTY DAWN Executive Director OF A NEW ERA? Head of Research & Consulting CB Richard Ellis EMEA (Europe, Middle East and Africa) of exiting loans. The terms suggest it could be as much as more deals will at least help of each loan are different, 27 billion in the UK alone. to clarify where values have but each will be for a finite With debt finance in short reached and provide some period, after which is has to supply, and that which is clearer evidence for valuers and be repaid. In some cases, loans available being more expensive investors alike. Second, they were structured to cover the and on more restrictive terms, would test the true strength intended period of ownership it seems likely that a significant of investor demand for real in full often seven or ten proportion of borrowers will be estate, and encourage buyers years. However, in recent years forced to sell. into the market. Investors may some investors were either It therefore seems likely that currently be sitting on the intending to hold the property a combination of worsening sidelines in the expectation of for a shorter period (before economic conditions and a further value declines, but they selling to take advantage of hardening of bank attitudes will also be aware that property rising prices) or took out shorter to default or renewal of loans is not like the equity market. term loans to take advantage will trigger more forced sales If you think that shares in a of very low short-term interest in the first half of 2009 than particular company are likely rates, intending to renew them have been seen in 2008. Whilst to fall, you can wait for them as necessary. It is impossible to potentially having an adverse to do so and then subsequently know for certain what volume impact on values, such sales of loans fall due for repayment could also have some positive during 2009, but estimates effects on the market. First, Figure 2. Yields rising across all sectors. EU-15 Index Rolling 12-Month Yield Shift. bps 100 80 60 40 20 0 -20 -40 -60 -80 -00 -01 -02 -03 -04 -05 -06 -07 -08 Sep-99 Mar Sep-00 Mar Sep-01 Mar Sep-02 Mar Sep-03 Mar Sep-04 Mar Sep-05 Mar Sep-06 Mar Sep-07 Mar Sep-08 RETAIL INDUSTRIAL OFFIcE Source: CB Richard Ellis 28 INTERNATIONAL MARKETS It is impossible to know for certain what volume of loans fall due for repayment during 2009

  29. enter the market to buy exactly the same shares at the lower price. Property isnt the same: if a particular shopping centre or office building is put up for sale, you have no certainty about when the next opportunity to buy it will arise. Thus even if they believe that the market may have further to fall, investors who have ultimate faith in a particular market may well be motivated to buy when a strategically attractive building IN THE LARgER, MORE LIQUID AND becomes available. MOST TRANSPARENT EUROPEAN MARKETS, PRIME YIELDS HAvE THE OUTLOOK FOR gENERALLY RISEN bY 100-130bPS PROPERTY vALUES FROM THEIR LOW POINT IN MID-2007 So where do values stand at present? As Figure 2 shows, after a four-year period from mid-2003 during which the impacts are now being seen investors (the new dominant yields fell and values rose across most of the continent. buyers) will require rather across Europe, prime yields In trying to form a view on the than the geared returns that have moved out sharply in outlook for property values, the more highly leveraged all three main commercial it is important to distinguish buyers were able to achieve. sectors during 2008. Our EU- two related but fundamentally This is evidenced by the 15 Prime Yield Indices have separate components of the fact that yields have shifted risen by 60-80 basis points price equation. The value across Europe in a way that over the last year, and this of any investment asset is leaves property priced quite probably underestimates the ultimately determined by the consistently relative to ten-year full impact on the market as future income it will generate government bonds. The prime a whole. Yields have been (in propertys case, the future office yield in most markets slower to respond in some rent), and the risk associated thus reflects differences in markets where there has been with receiving that income government bond yields, limited transaction evidence, (which will be reflected in the plus a fairly uniform risk and equally it is true that some multiple of current income premium for property, rather markets have been less affected that the investor will pay). The than any rigorous assessment than others. In the larger, more majority of the re-pricing that of differential rental liquid and most transparent we have seen in the market growth potential. European markets, prime yields to date has been the result of have generally risen by 100- a re-appraisal of risk in the 150 bps from their low point investment markets generally, in mid-2007. The UK market and the readjustment of pricing moved furthest and fastest, but to reflect the returns that equity It is impossible to know for certain what volume of loans fall due for repayment during 2009 Trends 2009 29

  30. NIcK AxFORD EUROPEAN PROPERTY DAWN Executive Director OF A NEW ERA? Head of Research & Consulting CB Richard Ellis EMEA (Europe, Middle East and Africa) Figure 3. Yields have been driving values since 2003. EU-15 Offices Capital Value Growth, % per annum. 30% 20% 10% 0 -10% -20% -30% Rising Falling Rising Falling Rising Sep-88 Sep-90 Sep-92 Sep-94 Sep-96 Sep-98 Sep-00 Sep-02 Sep-04 Sep-06 Sep-08 YIELD IMPAcT RENTAL gROWTH Source: CB Richard Ellis This is not to say that current why secondary yields have EcONOMIc AND OccUPIER pricing does not take rental generally moved out rapidly in MARKET PROSPEcTS growth prospects into account. most markets and sectors. As economic prospects weaken, Across Europe, it is a consistent Looking forward, once the there is no question that we expect theme that secondary property financial markets start to show occupier demand and rental has seen more significant some signs of greater stability, performance to be significantly outward movement of yields we would expect property lower than previously anticipated. than prime property. Of course, it prices across Europe to start This is true across almost all 30% is difficult to define secondary to differentiate more clearly sectors and markets. At present, 25% with any consistency, as between markets on the basis whilst there is no shortage of there are numerous reasons of their rental growth potential. economists making predictions 20% why a building may not be As Figure 3 shows, having come about the economy over the next 15% considered prime including through a period when falling few years, there is a significant lack 10% location, building quality or yields were the principal drivers of consensus over exactly what lies condition, tenant quality or of capital values and a shorter in store. Many are referring to the 5% lease characteristics. One reason period when rising yields were recession of the early 1990s as a 0 why secondary values have responsible for driving values reference point, and this is perhaps fallen further is that, being more back down again the property a convenient place from which to -5% risky, they are less attractive to market is set to return to more start thinking about property -10% investors in the current, risk normal conditions. This means market prospects. averse environment. However, that it will be rental growth that The origins of the 1990s property -15% secondary property is inherently will determine prices. So what cycle lay in the strong economic -20% far more vulnerable to any state are the occupier markets in? growth that was experienced across downturn in demand, and much of Europe in the late 1980s. thus has weaker rental growth Strong absorption resulted in low prospects. This helps explain levels of vacancy in most office 30 INTERNATIONAL MARKETS Secondary properties have fallen further as they have become less attractive

  31. markets, which in turn drove decline due to falling rents. the rental and economic cycle strong rental growth. At the start Returning to the present, it of recent years has been more of the 1990s, falling demand (due is clear that whatever the muted and because developers to a sharp economic slowdown) superficial similarities with the still bear the mental scars of coincided with a two-year period 1990s, the circumstances of the excess development at the start of development completions as current cycle are very different of this decade the scale of buildings that had been started in a number of ways. First, development currently underway in response to tightening supply whilst rents have risen over is far more modest. As Figure 5 entered the market after demand the last four years, the increase shows, whilst vacancy is already had started to fall. The resulting has not been anything like as quite high in some markets (such collapse in rents had a major strong or prolonged as was the as Frankfurt and Amsterdam), impact on capital values. From case in the late 1980s (Fig 4). As elsewhere supply is very limited arguably over-inflated levels a result, whilst rents in some even taking into account space at their peak, rents collapsed markets are currently viewed as that is under construction. as new supply exacerbated the somewhat frothy, in general effects of falling demand. In a rents are not at excessive levels number of markets, office capital and thus prone to collapse if WHATEvER THE values fell by 50%-60%, with demand weakens or new supply SUPERFIcIAL SIMILARITIES anything up to two-thirds of this is introduced. Second, because WITH THE 1990S, THE cIRcUMSTANcES OF THE cURRENT cYcLE ARE vERY DIFFERENT IN A NUMbER OF WAYS Figure 4. Rental growth in Europe. CB Richard Ellis EU-15 Rent Indices. % per annum 30% 25% 20% 15% 10% 5% 0 -5% -10% -15% -20% Sep-86 Sep-87 Sep-88 Sep-89 Sep-90 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 RETAIL INDUSTRIAL OFFIcE Source: CB Richard Ellis Secondary properties have fallen further as they have become less attractive Trends 2009 31

  32. NIcK AxFORD EUROPEAN PROPERTY DAWN Executive Director Head of Research & Consulting OF A NEW ERA? CB Richard Ellis EMEA (Europe, Middle East and Africa) Figure 5. Supply pipeline limited in many markets. term vacant units at worst. Currently vacant office space, plus developments scheduled for Major shopping centres have completion to the end of 2010 as % of total current stock. significant advantages for investors during economic downturns, and are viewed by AS PERCEnT oF SToCK 0% 5% 10% 15% 20% 25% 30% 35% many as a good defensive sector. Warsaw Retailers are less likely than Prague office occupiers to downsize or Barcelona Dublin Clearly it is important to look relocate to cheaper or smaller Amsterdam at the specific situation in each units, as their business is far Frankfurt market, but in general the signs more locationally sensitive. Helsinki are that the occupier markets Because shopping centres are Brussels are better placed to weather a multi-tenanted, rental default Hamburg downturn in demand than was by any particular retailer tends London City the case twenty years ago. to have less of an impact on Lisbon overall income than in an office Munich PROSPEcTS FOR RETAIL building. Furthermore, when Madrid In the retail sector, the dynamics vacancies do occur, units in Berlin are rather different. Weakening prime centres are also easier to Milan Vienna economic growth, rising re-let than in an office building. London Central unemployment and falling house Many international retailers Ile de France prices are likely to combine to are still looking to expand their Copenhagen reduce consumer confidence network into new markets, London West End and retail sales growth over and will actively seek to take Paris CBD the next 12-18 months. At first advantage of weaker market glance this would appear to be conditions to acquire prime units DEvELOPMENT PIPELINE Q4 2008 - 2010 vAcANT Q3 2008 bad news for investors in the and market share in cities Source: CB Richard Ellis retail sector, and indeed it is that would previously have been likely that rental growth in the harder to access. sector will slow. However, the Thus as occupier demand effects of a consumer slowdown THE cONUNDRUM weakens, as we must anticipate will not be evenly distributed. OF cENTRAL AND that it will, even if the economic Luxury retailers may be less EASTERN EUROPE downturn is as bad as in the badly affected, and budget This is particularly the case 1990s this does not mean that retailers in both the food and in Central and Eastern Europe the impact on rents will be the non-food sectors are already a region that faces some same. Even in those markets showing signs of increasing their interesting challenges in the where the development cycle is market share. Generally, it is current environment. In a further advanced, there are signs the mid-market that suffers most property context, we have seen that developers have been quick in a downturn. It seems likely significant yield compression to react by putting schemes that prime locations core high (in absolute terms and relative on hold or cancelling them streets and larger, more dominant to Western Europe) over the altogether; this wont prevent regional shopping centres will rental declines completely, but also prosper relative to secondary will reduce the level of new and tertiary locations that will supply entering the market. see falling rents at best, and long- 32 INTERNATIONAL MARKETS The market will, however, look slightly different to what we have become used to

  33. last five years. One argument MAjOR SHOPPINg cENTRES is that this compression was in HAvE SIgNIFIcANT ADvANTAgES large part driven by an excess FOR INvESTORS DURINg of capital looking to invest in real estate which, unable to EcONOMIc DOWNTURNS find a home in the west and/or attracted by higher CEE yields, was diverted into the region, pushing down yields. However, of countries. Whilst the capital the historic reasons for investing the argument goes, such markets targeting the region has reduced in real estate will re-assert remain secondary, and more somewhat, the markets have themselves once again. Property risky, and thus we would expect matured somewhat (although offers diversification benefits in a sharper correction in yields there remain significant risks a multi-asset portfolio, with a (even on prime property) in CEE associated with them), and high income return, good capital than in Western Europe. fundamental growth prospects security because it is a real A counter-argument is that, do appear stronger than in much asset, and a good track record of although forecasts for CEE GDP of Western Europe. Well located delivering robust performance growth have weakened sharply, prime property could therefore over the medium to long term. these countries are still expected perform better than expected The market will, however, look to see relatively strong GDP and, in the major markets of CEE slightly different to what we growth going forward, which at least, see relatively modest have become used to. Property will generate higher levels of yield shifts. Equally, secondary investment will be dominated by rental growth than in the West. property across the region is equity players rather than debt, It could also be argued that these likely to see a very significant and will target above average markets and economies will adjustment in value, with any economic growth, positive continue to mature - in some deficiency in the quality of the market rental growth prospects, cases even now being regarded investment being punitively with an emphasis on properties as core markets - and thus the discounted by investors. which offer asset management risk premium required to invest opportunities to generate income has fallen significantly compared cONcLUSIONS growth. They will target good with what was required even five So what can we conclude about locations which have a strong years ago. Taken together, these the outlook? As ever, property story to tell regarding the factors suggest that the impacts investment is ultimately current prospects or future re- on property yields should be about individual markets and positioning within their wider more moderate than in the West. buildings, so it is dangerous to market. Compared to the last There are valid elements to generalise too much. The key is few years, as the market begins both arguments, and in reality to understand the detail of the to return to normal, it will feel the truth probably lies markets you are looking to invest like the dawning of a new era. somewhere between the two. in - and get top quality advice In truth, those that have been Expectations for the CEE region from a qualified local specialist. active in the market for a while have undoubtedly weakened What we can say is that, however will recognise that this is actually over the last six months, not least long it takes, we do believe that a return to the traditional because geopolitical tensions investment model that has have risen at the same time as dominated the sector for many the financial markets have come decades in the past. It is time for under extreme stress in a number real estate to get back to basics. The market will, however, look slightly different to what we have become used to Trends 2009 33

  34. THE DIAMOND bEgINS TO SHINE In only three years, Morocco has become substantially more interesting from a real estate perspective. Emblematic multi-disciplinary projects such as Anfaplace are going to improve things even more and will open up the country to the main international investors. The CB Richard Ellis Morocco office opened its doors for business three years ago. It combined an innovative spirit, the ability to search for investment opportunities and the best client service. At this point the country was immersed in the process of launching the real estate market, with major developments in the tourist sector. Since then, many real estate companies have been taken public and many international developers and real estate investment funds have come to the country and have begun to construct ambitious projects. There has also been strong public support for this, with KARIM bEQQALI very significant economic Director incentives in order to drive the CB Richard Ellis Morocco secondary and tertiary sectors and establish a stable financial district and further liberalise markets. At the same time they have maximised management and controls in order to optimise the national economic transition, which has meant that the worldwide crisis has hardly been noticed in the country. In other words, the uncut diamond that we found on our arrival three years ago, is beginning 34 INTERNATIONAL MARKETS Different investors and developers have independently entered the Moroccan market with great success

  35. to take shape and shine, THERE HAS bEEN cONSIDERAbLE PUbLIc which increases investment SUPPORT FOR MOROccO, WITH vERY opportunities. SIgNIFIcANT EcONOMIc INcENTIvES PROvIDED IN ORDER TO DRIvE THE LOcATIONS SEcONDARY AND TERTIARY MARKETS AND OPPORTUNITIES In a review of specific real estate sectors, the high end primary residence market is one of the complex, located in La Corniche, most active areas and is on the rise which is the most prestigious in the main cities. Currently, its and consolidated residential and main crusader is Anfaplace leisure area in the city. (www.anfaplace.com) in Moroccan mid range residential Casablanca, which is an homes will see a similar rise. Inveravante project, Manuel Joves There is a large niche market for market with a local partner, such new real estate venture, which these constructions, which is as Morgan Stanley, who chose to has been developed by Norman being driven by a growing middle acquire Mixta-África in order to Foster & Partners. class which now has access to access the North African market, Located at the foot of the beach, the real estate market. Many in an operation which was also overlooking the Atlantic Ocean, developers have chosen this advised on by CB Richard Ellis. Anfaplace comprises of 260 option, which is one of the best apartments with between one and ways of consolidating oneself in OFFIcE DEMAND four bedrooms, a 234 bedroom the country over the long term The other real estate opportunity luxury hotel, an office complex, and has sustainable growth. in the country stems from the a shopping centre, a finance club In conclusion, various extreme lack of good quality and 104 holiday apartments investors and developers have office space. The highest levels of with one to two bedrooms. The independently accessed the demand are in the administrative property is a 93,000 sqm signature country and have had a great capital of Rabat and in terms deal of success in the Moroccan of the economic demand in market. As is the case with Casablanca. It is therefore difficult Deutsche Bank or Inveravante. to find offices that are in line with Others have preferred to enter the international quality standards in both cities, hence many occupiers opt for turn-key agreements, although actually moving in to Different investors and developers have independently entered the Moroccan market with great success Trends 2009 35

  36. THE DIAMOND KARIM bEQQALI bEgINS TO SHINE Director CB Richard Ellis Morocco conception and management, 6 euros a metre per month for and the lack of experience in logistics warehouses. There is this sector on the part of local a strong degree of unsatisifed developers. Time has been demand, and many sales of invested in this thanks to the warehouses with tenants accelerated professionalism in already in them are being design and management and closed. The main markets are marketing formulas. CB Richard Casablanca, due to its significant Ellis for example, is participating economic activity, and Tangier, the properties can take more than in the development and the due to its manufacturing three years. monitoring of various of industry and its port. There are many developments these centres. Hence, in Tangier there are currently being constructed. The Anfaplace will also house the important developments being first to open will be Anfaplace first shopping centre to be opened carried out in the Tangier Free business center, with more in the country. It will open at the Zone, with a second 60 hectare than 16,000 metres squared of beginning of 2011 and will have a phase being studied and in space and the different services gross lettable area of 18,000 sqm, Tánger Med, a total area of 850 that the complex provides. the main international brands, a hectares for industrial, logistics Other significant projects will spa and many leisure activities and commercial activities. be concentrated in Casablanca and restaurants. Important international operators Marina, which is a regeneration Esplanade dAnfa is expected have entered these projects (such project in the port area and to open at the end of this year, as Maersk and P&O, among CasaNearshore, on the outskirts of which is a shopping centre with others), which at the same time the city, which will benefit from a lettable area of 25,000 sqm, act as catalysts for national special fiscal conditions linked to which has been designed by industry and are fantastic the free trade zone. the internationally renowned investments for real estate funds. Chapman Taylor architecture firm RETAIL cOMES OF AgE and which is being developed HOTEL gROWTH Of the various real estate by the Moroccan real estate fund The Moroccan tourist sector sectors, retail is the one that Actif Invest, which is the first in has become the base of both stands out the most in the the country. Over the next five the real estate sector, as well Kingdom of Morocco. Over the years Actif Invest is expecting as the national economy. The last few years, an average of to develop eight more shopping government has begun two thirty franchises per year have centres across Morocco and in the plans, Azur and Emergence, been set up in the country, and long term, they hope to open two whose objecive is to develop there are now more than 300 more in Casablanca, the Morocco tourism along the 3,500 international brands in the Mall and Casablanca Marina kilometres of coast, and increase country. Casablanca makes up shopping centres. the number of tourists from the 27 percent of the market, mainly current figure of seven million due to the fact that it is the main INDUSTRIAL SALES city with purchasing power in The industrial market is also the country. booming, with relatively high Up until now, attempts to rental prices, of between 4 and develop shopping centres in Morocco have been marred by the intrinsic difficulties of 36 INTERNATIONAL MARKETS There is a large niche market for medium level residential constructions

  37. tourists to ten million in 2010. consolidation of the countrys This overall drive has also main companies are the best been passed on to the hotel example of this success. With so sector. Tourist stays in the many possibilities, the diamond main cities are at a good in the rough, which made us level and there are many new Palmeraie Développement have start the office here three years projects. In the coming years, participated in a process advised ago is beginning to shine. Hence, 30 new hotels are expected to by CB Richard Ellis on strategy, more than 20 employees have be built in Marrakesh, which architecture and operator been added to the original CB is the countrys main tourist searching. destination, as well as various Morocco has consolidated as an other projects in Casablanca, emerging economy, with stable AzUR AND EMERgENcES ObjEcTIvES which is the countrys main growth, important investment ARE TO DEvELOP TOURISM ON THE 3,500 business location. opportunities and strong real KILOMETRES OF MOROccOS cOASTLINE Leisure in Casablanca will estate growth. These are the AND INcREASE THE NUMbER OF TOURISTS grow substantially thanks factors which are making to the public tender for the the country one of the best regeneration of Sindibad, and investment opportunities for Richard Ellis team of founding its theme park. Actif Invest and Europe, given its proximity members of the office and and the offical aid for investors. the company is taking part in The presence of important many of the largest transactions international agents and the currently in the market There is a large niche market for medium level residential constructions Trends 2009 37

  38. cHINA, A TRUE OLYMPIAN Strolling through the streets of Beijing is a daunting experience, with the sheer size and implicit power of each building and street corner a sight to behold. Even considering the available figures, the size of the city seems almost impossible to believe. Its grandeur is streets ahead of that of New York or London. China, as a whole, has exhibited a chilling reality that we are starting to perceive from the outside: this is the leading western economy, and its lead over the rest of the world will continue to irreversibly grow over the coming years. Nowhere MIKEL else even comes close to MARcO-gARDOQUI matching this Asian giant. The national Cross Border Director countrys growth rate has been CB Richard Ellis Spain prudent and progressive, and will become more intense over the coming years. China does not revolve around one specific city; the country is more than just its capital or the huge Asian financial centres of Shanghai or Tokyo. It symbolises an overall dynamism, with more than ten cities about to break through the ten million population barrier. This is a machine running on full steam, 38 INTERNATIONAL MARKETS China is a machine running on full steam, growing and extending its influence over the rest of the western economies

  39. growing and extending its crucial factor in this growth These are stratospheric figures influence over the rest of the has been the ability to maintain that allow a whole world of western world in financial, growth rates at dizzying possibilities to be considered. political and social terms. heights, based on efficient Accumulated economic growth Since 1978 the Chinese processes and extremely in China is marginal if compared economy has grown at an intense labour productivity. to the demand, infrastructures annual rate of approximately and new markets generated by 10% of GDP. Thirty years of HALF A cENTURY an urban migration flow of non-stop growth have focused ON THE RISE these magnitudes. the astonished gaze of the The figures are impressive, not The demographic implications international community only do they reflect exemplary of the Chinese case on the on the country, attracting growth over the last decades, domestic and international investment from all over but also (and more importantly) property markets are evident, the globe. Nevertheless, this because forecasts for the next simple ratio is not enough to 20 years are even better. By explain investor development 2025 there will be 350 million THIRTY YEARS OF NON-STOP gROWTH and growth of such high more Chinese people living in HAvE FOcUSED THE ASTONISHED proportions. Other factors, urban areas equivalent to the such as the continuous entire population of the USA. gAzE OF THE INTERNATIONAL appreciation of the RMB against When added to the current cOMMUNITY ON THE cOUNTRY the Dollar, or the constant population, within sixteen AND ATTRAcTED INvESTMENT FROM drive from incessant domestic years a billion people will be ALL OvER THE gLObE consumption, are essential living in Chinas cities. ingredients for a growth cocktail served up every day by with demand for space and the Chinese miracle. Another services growing exponentially. A simple projection of land requirements shows that 40,000 million metres squared of office Chinas balance of payments: 2007. space and some five million new buildings will have to be (millions of Dollars) created, as well as 50,000 new ExPORTS 1.218.000 skyscrapers, which will be IMPORTS 956.000 erected on a space equivalent to TRADE bALANcE +262.000 ten times the size of Manhattan. Source: CEIC Compared to the rest of the China is a machine running on full steam, growing and extending its influence over the rest of the western economies Trends 2009 39

  40. cHINA, A TRUE MIKEL MARcO-gARDOQUI OLYMPIAN national Cross Border Director CB Richard Ellis Spain Although the opportunities are clear, the market interesting and expectations highly positive, the limitations and obstacles put up against the inflow of capital slows down and even hinders any form of direct presence from Spanish investors. Some have managed to channel their presence through markets which are more accustomed to the Chinese way of operating (as is the case with certain European markets and the US), thereby making their move into the country and carrying out clearly profitable activities that have enormous potential for future development. A cORNUcOPIA OF OPPORTUNITIES Starting from this basic premise, investors should become familiar world, China truly is in a league China can be boiled down with the various real estate of its own. It leads international to an essential principle: segments and their potential growth in volume, size, international clients are investment opportunities. In the potential and capacity, which strictly forbidden from directly first 4-month period of 2008 the undoubtedly leads investors to purchasing assets. Any Chinese real estate sector grew question exactly how they can investment in the country must benefit from this huge wealth be channelled through Chinas of opportunities. In recent FIEs, or Foreign Investment years copious investment in Enterprises. Both private China has led the countrys investors and foreign entities authorities to define and apply that purchase real estate assets legislation more strictly in this and property for investment area, thereby avoiding over- purposes, and not for their own speculation and also helping to use, are obliged to adapt to the efficiently regulate the system. FIEs, meeting with the huge Without probing too deeply number of legal requirements into the regulatory issues at and administrative processes hand, it is useful to highlight involved in the purchase. a few aspects of interest to foreign investors. The main legal, corporate and financial regulations applicable in 40 INTERNATIONAL MARKETS By 2025 there will be 350 million more Chinese people living in cities equivalent to the entire population of the USA

  41. Demand is booming and there are numerous developments underway, most of which comply with the prestigious image, complexity and quality by 11%, similar to the growth required for prime rental. The favourable alliances and a recorded throughout the entire only shadow that may be cast strong will to commit to the previous year. These figures grow on these projects is whether Chinese market. From that point in value once compared to the such a high rate of development onwards new markets should sharp drop in the international will allow them to remain at be sought and local structures real estate area. China could the top of the rental scale long internationalised, with a not possibly experience the enough to make the investment commitment to remain in the same kind of downturn seen worthwhile, or whether the game for the long term and the in the rest of the world, due to dynamic nature of the market conviction to consider China the strength of its economy, the will move them down a notch as a priority market. The rest scarcity of internal stock and much too quickly. of the country will be the next the sustained growth of its cities All in all, the figures shown by step, and analysis of this area and the basic needs of their the main markets are reassuring. should begin as soon as possible inhabitants. With this in mind Beijing has 1.2 million metres in order to take full advantage of the Chinese government should squared of available land out of a the benefits that will arise in the continue to encourage this real total surface area of 7.03 million years to come. estate boom as much as possible, sqm. In Shanghai the situation is providing greater quantities of even better, with office stock of available land, granting more 2.1 million sqm and a vacancy licenses for new developments rate of 2.5%. A comparison of and generally responding to the this state of play with areas such huge demand, balancing it with as Madrid (11.4 million sqm), the available supply and thereby Paris (21 million sqm) or London mitigating the impact of current (22 million sqm), along with soaring prices. growth rates, latent demands, The present upward trend market niches and potential in rentals within the office clearly shows the investment market is due to both the strong opportunity just waiting to be presence of large multinationals exploited in China. and the expansion seen in As already mentioned the the main national companies. opportunities are hard to ANY INvESTMENT IN miss, and investors simply have to balance the different THE cOUNTRY MUST bE variables that play a part in cHANNELLED THROUgH the equation: a local partner, THE cOUNTRYS FIES, OR a legal structure in line with FOREIgN INvESTMENT government requirements, ENTERPRISES By 2025 there will be 350 million more Chinese people living in cities equivalent to the entire population of the USA Trends 2009 41

  42. HOUSINg IN POLAND: WHERE IS THE PROMISED LAND? After several years of residential ups and downs, Poland has the potential of setting up a more ambitious real estate model. Reforms will be the key to achieving this. The Polish residential sector has the capacity to set its path straight, but only if it modernises and undertakes a series of structural reforms. There is still margin for sustainable growth, and European Union incentives have minimised the impact of financial uncertainty. THE POLISH bAcKgROUND No more than two years ago Poland was experiencing the MIKOLAj MARTYNUSKA most intense real estate boom Residential Director in its recent history, with the CB Richard Ellis Poland market emerging from the crises that had rocked the real estate sector at the end of the 90s and in 2002. These were troubled times, when it was not strange to see despair on 42 INTERNATIONAL MARKETS Two years ago, Poland was in the middle of a major residential boom

  43. the faces of managers from the main national development www.restaura.com/gorskiego/ companies. In those days potential buyers were not normally willing to spend an average of 3,400 zlotys (750 Euros) per metre Adhesion had a clear increases encouraged a rise squared of residential property. psychological impact, and in demand, with no realistic Even if they could afford changed a wide range of possibility of the countrys these prices, they still had to fundamental issues within supply being able to respond provide between 70% and 80% the country. Interest rates, for in time. of the financing themselves, example, fell to 7% in the case In certain cases domestic and as mortgage interest rates of the Polish currency and to international funds bought exceeded 15% per annum, with half of that figure for the Swiss groups of apartments and even average repayment periods of franc, which became the star entire buildings off-plan. The 15 years. of the mortgage market. The aggressive acquisitions carried Queues at the door are a reliable average duration of a mortgage out by these funds, often indicator, and thats why was extended to 30 years, and comprised of small Spanish, developers are the first to know the loan to value ration reached Irish or English investors and when a crisis period has come up to 120% in extreme cases. typically with a 10/90 payment to an end. In this regard visits structure, associated their from buyers who were really SPEcULATIvE interested and prepared to even PROgRESSION pay that bit extra for better The situation became one of views or a bigger terrace began madness in 2006, with price IT IS ESTIMATED THAT IN to grow from mid-2003, with growth indices sky rocketing. THE PAST FOUR YEARS the increases in price indices Average prices for new housing SPEcULATIvE AcQUISITIONS arriving shortly afterwards. in Warsaw reached 7,900 IN POLAND HAvE Then, in May 2004, came the zlotys (2,010 Euros) per metre AccOUNTED FOR 30-40% OF long-anticipated incorporation squared, with year-on-year THE MARKET of Poland into the EU, with growth of 59%. The peculiar an immediate impact on the characteristics of the real estate countrys economic outlook. sector meant that the rapid Two years ago, Poland was in the middle of a major residential boom Trends 2009 43

  44. HOUSINg IN POLAND: MIKOLAj WHERE IS THE MARTYNUSKA Residential Director PROMISED LAND? CB Richard Ellis Poland purchases with those of Polish investors, reaching investment levels which had hitherto been unheard of in the country. This was a time when members of the Irish agricultural community wanted to reinvest the gains they made on reclassifying their land to residential space, a time when Spaniards were joining possible to those offered by the trips organised by various the developers. It is estimated property agencies to investigate that in the past four years investment in the area. speculative acquisitions in Against this backdrop the main Poland have accounted for buyer segment, composed 30-40% of the multi-family of those who were buying development market in the property which they would countrys main cities. occupy themselves, could The Polish supply was in only compete with speculative no fit state to respond as demand through quick quickly as the sudden growth. purchases, with no time to The countrys residential demand the characteristics or development process lasts layout they really needed and for four years as a minimum, adjusting their prices as far as and land development was practically non-existent. Not only that, but these periods were stretched out even further due to the weakness of the Polish town planning system. As a result supply did not start to properly grow until well into www.restaura.com/images_db/inmuebles/PIEKnA_album_int.pdf 2007, by which time the prices of residential properties were STATISTIcS SHOW A DEFIcIT OF 1.5 MILLION HOMES IN POLAND, AND 85% OF THE AvAILAbLE STOcK IS MORE THAN 25 YEARS OLD 44 INTERNATIONAL MARKETS At the end of the third quarter of 2008, Warsaws residential market was still reasonably stable

  45. Residential stock. Old Europe vs. New Europe 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Slovakia Poland Romania Hungary Czech Republic Germany France Spain www.restaura.com/gorskiego/ Portugal 2.1 2.4 Source: Eurostat AvERAgE NUMbER OF PEOPLE PER APARTMENT cENTRAL AND EASTERN EUROPEAN AvERAgE out of reach for the majority THE cURRENT SITUATION EU AvERAgE of buyers. According to the latest report Over the months, various issued by CB Richard Ellis, at developers followed a sales the close of the third quarter policy of setting prices at of 2008 the Warsaw residential exorbitant levels in order market was relatively stable. to reduce demand. This After the uncontrollable growth Housing finished in Warsaw, was eventually achieved, of 2004-2006, the market seems according to developers. and consequently certain to be in search of a new point developments which were of equilibrium. Supply rose by 0 4,000 8,000 12,000 16,000 20,000 well underway have only just 28% in 2007, and throughout 1999 begun to be sold. Put simply, 2008 there may have been a the uppermost limit was slight rise in the number of 2000 reached. Unfortunately, this homes delivered. Average prices 2001 situation was unlucky enough also continued to grow in 2008, 2002 to coincide with an extremely with annual growth of 5% serious external factor: one leading to prices of 9,250 zlotys 2003 of the most crippling periods (2,760 Euros) per metre squared. 2004 of economic turbulence the The preoccupation stems from financial world has ever seen. the slowdown in sales, the 2005 effects of which have been felt 2006 by the majority of developers since the fourth quarter of 2007 2007. There are approximately I-VI 2008 42,000 homes currently under construction in Warsaw, Source: oficina Central de Estadísticas with pre-sales volumes for cO-OPERATIvES DEvELOPERS INDIvIDUALS At the end of the third quarter of 2008, Warsaws residential market was still reasonably stable Trends 2009 45

  46. HOUSINg IN POLAND: MIKOLAj WHERE IS THE MARTYNUSKA PROMISED LAND? Residential Director CB Richard Ellis Poland the various developments will have a positive knock- fluctuating between 40% on effect on sales. The most and 80%, according to the common incentives include free scheduled dates for handover. parking spaces, kitchen fittings Pre-sales are down 20 and a wide range of discounts, percentage points in the last and some developers even go year, even though the number as far as offering free family of homes under construction holidays (to Spain, where else?) has risen by about 10%. or even cars, the most recent In this light many developers and innovative initiative. have increased their marketing In almost all cases the value activity to attract visitors to of the promotions or direct show homes which, hopefully, discounts is between 5 and 10% of the total value of the home. Even then, and faced show a deficit of 1.5 million with the precarious nature of homes in Poland, and 85% of Gross prices of new build housing in Poland. the financial and mortgage the available stock is more than Main cities: Growth. Zlotys sqm markets, it is still difficult 25 years old, most of which can for the existing demand and already be considered highly 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 the interest shown by buyers depreciated. to be converted into actual The area that has shown growth 2000 transactions. In this respect the over these months has been situation has not changed much that of economic uncertainty, over recent years: statistics modifying financing conditions 2001 at their very roots. Although the Polish economy is still on the rise, almost all banks 2002 have suspended the granting of mortgages in Swiss francs, while the interest rates related 2003 to the Polish currency now stand at 9%, with maximum financing equal to 80% of 2004 the total cost of the home purchased. 2005 Faced with these circumstances, as well as a highly volatile financial outlook, many 2006 purchasers are putting off their decisions to buy. As it becomes more obvious that there is more 2007 supply on the market, with Source: Reas, Gazetadom.pl, CBRE WARSAW WROcLAW KRAKOW TRI-cITY POzNAN 46 INTERNATIONAL MARKETS Many projects do not comply with occupiers/buyers needs

  47. www.restaura.com/kameralna a wider range of properties THE FUNDAMENTAL PRObLEM SEEMS under construction, and with TO bE THE LAcK OF ALIgNMENT many speculative investors bETWEEN SUPPLY AND DEMAND putting their homes up for sale, potential buyers now have a significantly wider choice. In any case, the fundamental they will occupy themselves. Mortgages as a % of GDP 2007 problem seems to be the lack This distortion can be seen of alignment between supply in the phrase the skys the United Kingdom 80% and demand. Both were defined limit, a slogan which has during the markets years of become highly popular among Ireland 62% prosperity, based on excessive developers over recent years. Spain 53% prices for both the land acquired It describes, for example, the Media EU 39% at the end of 2006 and the expectations that over 20 costs of construction projects residential towers of between Croatia 19% contracted since that date. 30 and 70 floors will be Czech Republic 14% We believe that the design and constructed in Warsaw and quality of recent residential other cities within the country. Hungary 12% products have been based To date none of these properties Bulgaria 10% on the most disoriented have been built, but several demand segment, comprising developers have purchased land Poland 10% speculative buyers who are at prices based on these kinds Slovakia 8% often foreign and lack sufficient of structures. This was nothing EEC 6% information on the peculiar more than a pipe dream, at least characteristics of the market. for this part of the world. Romania 4% The result of this is that many Source: European Mortgage Federation developments do not meet the real requirements of those who are purchasing homes which Many projects do not comply with occupiers/buyers needs Trends 2009 47

  48. HOUSINg IN POLAND: MIKOLAj WHERE IS THE MARTYNUSKA PROMISED LAND? Residential Director CB Richard Ellis Poland LOOKINg TO THE FUTURE Despite everything, the future of the Polish residential market (and the countrys real estate market as a whole) is still a bright one. Polands economy must tackle the outflow of foreign capital, as well as todays global financial instability. Not only that, but the country is also facing up to the challenge of developing new transport infrastructures, many of which rely on EU financing. The countrys main competitive advantage continues to be its relatively cheap and well-trained workforce, which can offer large international corporations the cost savings they seek when outsourcing their service centres. The country must also rise to other ambitious challenges if it is to keep growing, including www.restaura.com/images_db/inmuebles/PIEKnA_album_int.pdf the transformation of public entities, financial reform, THE FUTURE OF THE POLISH RESIDENTIAL MARKET (AND THE cOUNTRYS REAL ESTATE MARKET AS A WHOLE) IS STILL A bRIgHT ONE www.restaura.com/kameralna 48 INTERNATIONAL MARKETS If changes are not made, the global economic slowdown will significantly affect Poland

  49. Accumulated growth of mortgage debt. Poland 0 20 40 60 80 100 120 140 1998 1999 2000 .restaura.com/images_db/inmuebles/PIEKnA_album_int.pdf 2001 www 2002 2003 2004 2005 2006 I-VII 2007 XII 2007 VII 2008 0% 4% 8% 12% 16% 20% 24% 28% Fuente:: Eurostat AccUMULATED gROWTH OF MORTgAgE DEbT (MM zLOTYS) % increased legal transparency more transparent and efficient and the introduction of the and including direct and clear Euro. Domestic financial participation from the expectations must be sufficient private sector. to allow the residential market Land Law reform. to continue to grow, although Increased efficiency and this has to be carried out at a competitiveness in the much more sustainable rhythm construction sector. in the future, similar to that Promotion of home rental seen in the rest of the economy legislation. global environment, and will as a whole. The key to ensure Encouraging the development once again resemble the so- that this objective can be met of efficient public and called Spanish miracle. On include the following: transport infrastructures for the flipside, however, if the Transformation of Polish town city outskirts. aforementioned reforms are not planning legislation, making it Establishment of a coherent undertaken, the international home financing system. economic slowdown will have a With these changes the Polish direct impact on Poland, and its residential market will be real estate cycles will become able to continue to grow, much more marginal and short even within an unfavourable term in nature. If changes are not made, the global economic slowdown will significantly affect Poland Trends 2009 49

  50. The commitment to renewable energies, collaboration between architects and authorities and the need to cut business costs are specific features of architecture nowadays. SUSTAINABLE ARCHITECTURE 50

  51. 3 SUSTAINABLE ARCHITECTURE Trends 2009 51

  52. THE CURRENT STATE of SpANISH ARCHITECTURE The quality of work undertaken by Spanish architects has deservedly achieved a very high level of international recognition. Unfortunately, the same cannot be said of Spanish architecture as a whole, and by that we mean the vast majority of what is actually built in Spain. I refer to the architecture of what is built in the typical suburbs of our cities, and which robs our villages of their charater, with only a handful of valuable exceptions. The proportion of interesting architecture built is very small compared to the total volume of construction. And unfortunately this is an unquestionable fact, despite the high standard of our architectural education and JAvIER MARTÍNEz the coverage that elite Spanish National Building architecture has in diverse Consultancy Director international forums. CB Richard Ellis Spain At some point way back in Managing Director the 20 th Century, there was a FM Arquitectos definite split between quality architecture and the interests of Spanish society. 52 SUSTAINABLE ARCHITECTURE Too much regulation does not create better architecture, but in fact does quite the opposite

  53. THE CoopERATIoN BETwEEN ARCHITECTS ANd AUTHoRITIES IMpLIES A gUARANTEE wITH RESpECT To THE qUALITy of THE fINAL pRodUCT There is no doubt that this any architectural interest, save split was due to varied and a few valuable exceptions). complex reasons and we By stipulating the depth of are not trying to exonerate the buildings, overbuilding architectural professionals, rights, and in some cases even which are all too often reduced finishes and roofing types they to the role of mere Notaries. turn the architects job into However we would like to a simple case of façade-ism, however there is no doubt that be politically risky. Town and consider the influence that the drastically reducing the chances the cooperation between the land-use planning cannot be two main players in property of introducing any quality Authorities and prestigious only or mainly in the hands of development, namely the Town architecture so much so that architectural professionals with politicians, career civil servants, Halls and the developers, have the most reasonable solution is direct involvement in drawing lawyers and traffic technicians over architectural design and dictated by just the maximum up urban plans and definite and other peripheral areas of how that level of influence all usage of the extortionate projects has created products architecture. too often converts them into the buildable area. of proven quality, only when Without doubt, being able to real architects. they shun the excessive pre- count on the direct involvement The Town Halls turn into CoopERATIoN NEEdEd programming brought about by of experts like Alvaro Siza for architects through the There is clearly a requirement the regulations. the reconstruction of Lisbon, implementation of excessive for classification of land, and Acknowledging the need for planning laws, which in to set population densities and input from other experts, this practice produce predictable mandatory health and safety cooperation between architects and vulgar buildings which measures. However too much and Authorities implies a impede any attempts to build regulation does not create better guarantee with respect to the something interesting (it is architecture, in fact it does quite quality of the final product. It is no coincidence that the new the opposite. important that the best experts Madrid suburbs are the place The architectural quality collaborate with the Authorities, to find so many incredibly of our towns and cities can and that this can give rise to similar buildings which lack never be imposed by law, brave decisions that may even Too much regulation does not create better architecture, but in fact does quite the opposite Trends 2009 53

  54. THE CURRENT JAvIER MARTÍNEz STATE of SpANISH National Building Consultancy Director CB Richard Ellis Spain ARCHITECTURE Managing Director FM Arquitectos acknowledged architects will involve a colossal change in public perception if we compare them with their predecessors, It is worthwhile distinguishing the old Barajas airport or the between public and private Courts in Plaza de Castilla. developers, and that it is the This renewed interest towards former who have been the architecture has also caused the first to have timidly started to big private developers and other appreciate architecture albeit sectors (big vineyards, banks) sometimes for reasons of to look to the international electoral profitability. stars of architecture for their important projects. It is INTEREST ANd becoming common practice for pERCEpTIoN the biggest developers, usually The State and in general almost those involved in the tertiary all of the public authorities have sector of office buildings and understood and quickly retail centres, to organise select realised that quality competitions between various architecture is very profitable in architecture firms before political terms. actually appointing one. The Guggenheim effect Not long ago this was created by Frank Gehrys unthinkable and shows the new museum in Bilbao is a lesson importance given to architecture or on Oriol Bohígas for the that all Authorities have learned in the property sector. regeneration of Barcelona, and envied. Something similar applies to the mean the best guarantees for the Although Authorities are new and growing interest that success of the venture. chasing propaganda results architecture and sustainable In practice developers also play by hunting for brand name construction has awakened the role of architects since architectural pieces signed by they always choose the architect the new media stars produced and have a decisive influence by global architecture, the truth over their work. It has always is that in the end, thanks to the been said, and I firmly believe, recent indirect interest in that the client is responsible for architecture, big public works of at least 50% of the quality of an acknowledged quality have been architectural design. built. And this has indisputably Developers interpret the placed architecture in the media interests of society in order to spotlight, and therefore in the better sell their product and general public spotlight too. (generally) they only recently Examples such as Madrid T-4 realised that they need quality by the architect Richard Rogers, architecture to achieve this. or the forthcoming spectacle of the City of Justice (Campus de la Justicia) in Madrid with works by Foster + Partners and other 54 SUSTAINABLE ARCHITECTURE The client is responsible for at least 50% of the quality of an architectural design

  55. in the public in general, and Architecture and Sustainability therefore amongst public and may and must be two private developers. differentiating factors in new developments. The time when EffICIENCy ANd the market absorbed products RATIoNALITy of varying quality as if they There no doubt also exists an were just the same is now over. obvious propaganda interest Differences in quality must now in the whole sustainability stand out from all the rest, and SUSTAINABILITy issue, but even if it sometimes these two factors can bring an pRoMoTES NoBLE harbours less than transparent undisputable added value to the CAUSES SUCH AS interests in the end it does quality of a property. ACHIEvINg MAxIMUM promote noble causes such as ENERgy EffICIENCy achieving maximum energy ANd MoRE RATIoNAL efficiency and more rational SoLUTIoNS solutions. That is how things always were until man thought he had discovered the illusion of a cheap, unlimited energy source without even thinking of its consequences for the planet. This renewed interest towards architecture and sustainability is like a fine rain that is increasingly soaking the different business and social strata. And since fine rain falls downwards the big developers, both public and private, have been first to become aware of its benefits and little by little this awareness (or interest, depending on the case) slowly trickles down to the remaining business and social strata. In the context of the current crisis that the business sector faces, the two values of Quality The client is responsible for at least 50% of the quality of an architectural design Trends 2009 55

  56. LESS IS MoRE We are clearly in troubled times, and it is crucial to contain and reduce costs in our work spaces. It is logical that trends are moving towards reducing space to avoid the high rent paid in days gone by, but it is not such a good idea to jump the gun. If someone told you that there was no need to change offices, and that your company could pay less without compromising its image or employee satisfaction, would you believe them? This statement may not, however, be as far from the truth as you might think. To check the theory out, the following key points will help to turn work spaces into more efficient and much more productive environments. oNE: wHAT wE NEEd dAvId dE BoET Before making any changes Building Consultancy Director companies should always carry CB Richard Ellis Barcelona out an in-depth analysis of their requirements and those of their employees. This should take the form of a coordinated, multidisciplinary study to evaluate issues such as the companys philosophy and projects, the image it wants to project (both internally and 56 SUSTAINABLE ARCHITECTURE Using ergonomic elements is essential if you want to make savings within your company

  57. externally), its future projects or as it could be? Is this the best the qualifications it seeks in its building for my company? employees. All of these aspects All of these questions need to are crucial when it comes to be answered before making efficiently defining any any changes to your companys work space. premises, as reflecting on the issues at hand will help to obtain SATISfACTIoN SURvEyS Two: wHo CAN HELp a space that is more efficient, CAN HELp IMpRovE When it comes to creating a new thereby incurring lower costs and wHEN MAkINg fUTURE space, most businesses simply increasing employee satisfaction, CHANgES, AS wELL base their ideas on the premises with a positive knock-on effect on they currently occupy, with productivity. With this in mind AS pRoMoTINg A only a few companies using this it is always recommendable to SENSE of wELLBEINg opportunity to ask themselves seek professional advice, as the ANd ENCoURAgINg A whether their work space way in which this important pRoACTIvE ATTITUdE has been used in an efficient move is managed will shape the wITHIN yoUR BUSINESS manner. In this regard a few success or failure of your new simple questions will suffice: surroundings. Has the way in which we work changed? Do we use the most suitable elements? Is our internal structure as productive Using ergonomic elements is essential if you want to make savings within your company Trends 2009 57

  58. dAvId dE BoET LESS IS MoRE Building Consultancy Director CB Richard Ellis Barcelona professionals or the very image of the company, among many other variables. Investing in a solid design will help to optimise these issues without compromising your companys philosophy or objectives. The idea is to strike the perfect balance between optimisation, flexibility, interaction and cost savings, and the key to success in this area undoubtedly lies in a good design. foUR: LookINg AfTER yoUR EMpLoyEES Using ergonomic elements is essential if you want to make savings within your company, although only a few business owners realise this. Research has shown on numerous occasions that 30 percent of employee sick leave is down to poor posture, bad lighting or a lack of availability of efficient working tools. Ergonomics is the natural response to these errors, saving money, increasing productivity and maintaining loyalty among a companys professionals. Rigid formality THREE: THE IMpoRTANCE in the workplace is a thing of of A wELL-dESIgNEd the past, and now employees SpACE appreciate being able to feel Cost is often the main factor at home in the office. It goes on which companies base without saying that more their decisions relating pleasant surroundings lead to to work spaces. It is only an increase in productivity. on rare occasions that employers consider that any functional defects that may arise could directly penalise the performance of their 58 SUSTAINABLE ARCHITECTURE Do you really need to pay prime rental prices for storage space?

  59. ARE yoUR CoMpANyS pRofESSIoNALS ALwAyS IN THE offICE? ARE THEy ofTEN TogETHER IN THE BUILdINg AT THE SAME TIME? do yoU THEREfoRE NEEd So MANy offICES? this process, as is the use of construction elements which can be easily reconfigured and re-used. This will help spaces will lead to surprisingly reduce costs, as well as substantial savings. ensuring minimal impact on The same theory applies to your employees. storage. On many occasions fIvE: SAvINgS a large percentage of office SEvEN: poST-CHANgE Three simple questions unlock space is used for storage, EvALUATIoN the door to efficiency: Are your but sufficient document It is important to learn from companys professionals always management or outsourcing this our mistakes. Never be afraid in the office? Are they often space are important factors in to ask your team what they together in the building at the saving costs. Do you really need feel about the changes, as same time? Do you therefore to pay prime rental prices for satisfaction surveys can help need so many offices? storage space? improve when making future If you answered no to any of changes, as well as promoting these questions, then there is SIx: CHANgE a sense of wellbeing and room to make savings within MANAgEMENT encouraging a proactive your company. An employee in The need to increase attitude within your business. a normal job requires an average organisational flexibility, It should never be forgotten space of 13 metres squared. optimise space, interact and that the most important asset Applying monthly average grow may mean that individuals of any business is its human rent of 20 Euros, this works feel uncomfortable or unhappy element. out as a direct annual cost of with so much change. If every Based on these factors the CB 3,120 Euros, not including structural modification involves Richard Ellis Design & Build implementation expenses. A a significant impact on work Department helps companies simple step like using work spaces, discomfort and reduced on a daily basis to create areas that are not employee- availability are unavoidable. surroundings that are more specific or creating shared Your team must be informed of pleasant, responsible and the reasons for and the scope of productive, without losing the changes, how they will be sight of their functionality affected and exactly what the and efficiency. purpose of the modifications is. Information is a cornerstone to Do you really need to pay prime rental prices for storage space? Trends 2009 59

  60. sustainability & energy Sustainable development is meeting the needs of the present without compromising the ability of future generations to meet their own needs. Companies such as CB Richard Ellis and Nokia have committed to achieving this. 60

  61. sustainability & energy 4 Trends Trends2009 2009 6161

  62. sustainability in offices Sustainability and energy efficiency and logistics have become widespread due to the cost savings and responsible attitude that they impart. CB Richard Ellis warehouses has opted to lead their application of this methodology in offices and logistics warehouses. The most widely accepted definition of sustainable development appeared in the Brundtland Report produced for the United Nations in 1987 by the Norwegian Doctor Gro Harlem Brundtland. The report identified sustainable development and sustainability as the actions able to meet the needs of the current generations without compromising the ability of future generations meeting their own needs. When sustainability is applied to the property market, its facets become clear: land, materials and energy. There is also another growing demand: the concept of Corporate alfonso galobart Executive Managing Director CB Richard Ellis Spain 62 sustainability & energy Property developments now take into account criteria such as social responsibility and efficient energy consumption

  63. become an essential strategy property in reversing global warming. developments now Since CB Richard Ellis is take into account one of the worlds largest criteria such as commercial property managers, social responsibility our objective is to promote and efficient energy and drive these initiatives consumption throughout the world. more stringent legislation, Social Responsibility, CSR. there has been a change in taken into account. energy auditing This is effectively a corporate mentality. The relationship of The buildings that we live The European Directives and commitment to function quality-price is no longer the and work in every day have a Spanish Legislation have made transparently, in accordance only measurement used in a very high potential to reduce an extreme environmental with ethics and respect for property development. Criteria energy consumption and carbon commitment through stricter employees, communities and such as social responsibility, dioxide emissions. Maximising regulations and the requirement the environment. Companies effi cient energy consumption, the performance of existing for building energy performance and tenants are increasingly the use of natural resources and buildings and intensifying certifi cates. By the beginning aware of these values, and pay tenant wellbeing are also now the use of new buildings has of 2009 the free bar of energy ever increasing attention to consumption will have run out compliance with their own CSR. with the fi nal implementation Things have changed quickly. of Directive 2002/91, which A few years ago, the application tenants constructors was approved on the 4 th January of sustainability to the property WE WANT TO OCCUPY WE BUILD SUSTAINABLE 2006. Thenceforth, all existing market was a mere pipe dream. SUSTAINABLE BUILDINGS BUILDINGS BASED buildings must also certify their BECAUSE WE BASE OUR UPON TECHNIQUES AND Undertaking a sustainable DECISIONS ON THE LIFE CYCLE SPECIFICATIONS THAT ARE energy effi ciency just as all new construction required passing COST OF THE BUILDING PROFITABLE IN THE LONG TERM buildings have had to do so many additional costs to since 2007. the end user that it became That which is not measured impossible to achieve. Since investors developers does not exist and cannot be then, the technology and the self improved anyway. This was TENANT DEMAND WE HAVE TO DEVELOP development of sustainability LEADS US TO FINANCE SUSTAINABLE BUILDINGS the main slogan in one of the have reduced the costs of SUSTAINABLE BUILDINGS TO SATISFY THE NEEDS OF guidebooks on energy saving environmental accountability. INVESTORS AND TENANTS and effi ciency edited by the And more than anything else, Government. It has not taken Property developments now take into account criteria such as social responsibility and effi cient energy consumption Trends 2009 63

  64. sustainability in offices and logistics alfonso galobart Executive Managing Director warehouses CB Richard Ellis Spain long for this advice to be put it may, it is an important matter into practice. Companies since buildings and homes with the ability to undertake account for 40% of total energy energy audits now exist. The consumption. majority of these have a very Savings are important, more simple marketing strategy: the than ever when we come leed® sustainability bill for their services is only a from an era in which the certification percentage of the actual savings only determining factor in The fact is, there is an ever- achieved. Its not a bad system, a construction Project was increasing demand for because the steady increase in the budget. But responsible sustainable buildings in energy prices combined with the consumption is also becoming Spain, and this has happened money squandered up until now intrinsically valued. For despite the fiscal incentives to due to a lack of foresight means example, to begin with it may promote these activities, or to that any savings, however small, seem that stricter regulations control emissions, having gone produce a visible financial controlling air emissions put no further than being mere return in the short term, as European businesses at a parliamentary proceedings. well as giving an insight into disadvantage when compared Some developers are fully what will imminently be an to their Asian counterparts, aware of this. Some have even obligatory inspection. Be what where the equivalent laws chosen to go beyond the legal requirements and actually minimise the environmental impact of the shopping centre, industrial building or office cb richard ellis can provide block that they have started sustainability and efficiency to build. The reasons for this services based upon real are clear: society will demand cost savings that they provide sustainable locations, controlled energy use, extremely efficient water use, good quality interior air or an adequate selection of materials are much more lax or indeed and resources and they prefer to completely non-existent. But in anticipate these demands. the long run, and when many It is market demands that countries have begun to provide have driven the development tax incentives for reductions, of new construction methods where the location and price and standards, upon which conditions are equivalent, more architects, developers and and more businesses will choose clients can define a sustainable to locate in the area that best project, based on measureable respects the environment. criteria and parameters. In As integrated property Spain, the LEED® (Leadership managers, CB Richard Ellis in Energy and Environmental can provide sustainability and Design) certification system energy efficiency services based developed by the US Green on real cost savings. Building Council (an 64 sustainability & energy There is an ever increasing demand in Spain for sustainable buildings

  65. tariffs by equivalent cost savings for ultimately more efficient solar technology. The idea is to The Energy and Sustainability reach a balance in the market Department of CB Richard Ellis with returns on investment of has the necessary methodology between 10 and 11%. to define the best option in every case: photovoltaic solar the cb richard capture, absorption cycles, or ellis answer micro-generation. Committing to ecological Both the Renewable Energies buildings is always a good Plan 2005-2010 and the current option for energy efficiency. Energy Saving and Efficiency This reflects the CB Richard Strategy (E4) applied in Spain Ellis corporate objective, have been a major driving announced in May 2007, of factor for these technologies, becoming carbon neutral by which are otherwise expensive 2010 whilst at the same time to international non-profit The system is available for a and lacking in competitive roll out a plan to support clients organisation) has become wide range of projects: pricing. Statutory support centred around implementing popular and everyday gains in LEED® NC New Construction. has materialised in the form energy efficiency programmes strength. For new-build projects. of feed-in tariffs for specialist across the more than 1,700 LEED® is a classification LEED® CI - Commercial generation of electricity, million square metres of system for the various standards Interiors. For interior through such systems as the office space that the company used in the construction of refurbishment of existing premiums recently approved manages throughout the world. sustainable and highly energy buildings. under Royal decree 1.578/2008. We understand that our clients and environmentally efficient LEED® CS - Core & Shell. For In the particular case of demand energy efficiency buildings. It is based on a leased office buildings. photovoltaic installations, the and better environmental credits system that ranges from LEED® H - Homes. For single- previously high premiums performance. For Brett White, the strict certification up to family housing. have now been reduced by President and global Chief platinum level, passing through almost 30%. In any case, Executive for CB Richard Ellis, silver and gold. The efforts of CB sustainability in the previous and the current efficiency and sustainability Richard Ellis in this regard are logistics warehouses financial support have enabled present good opportunities for directed towards ensuring that A different strategy is adopted development of systems capable us to commit ourselves along the target LEED® sustainable for logistics warehouses where of producing enough energy to with our clients and improve building certificate is achieved it is not worth focusing efforts make installation costs cheaper. their operating performance according to that previously on improving the interior In fact, the goal seems to be to whilst we all help to protect the defined by the Client. environmental quality or compensate the reduction in environment. occupant wellbeing because at the same time the exploitation costs and the use of renewable energies must be optimised. There is an ever increasing demand in Spain for sustainable buildings Trends 2009 65

  66. sustainability: the nokia perspective Nokia have analysed their products life cycle in order to minimise its environmental impact through all stages of their operation The dominance of Nokia in the mobile handset market, public demand and concerns about their impact on the environment, combined with sustainable development, have led the Finnish giant to the following thought: a world where everyone is connected could help contribute to sustainable development. With more than 900 million users, the opportunity and influence that any action, however small, will have on society is clear. This places a huge degree of responsibility on all aspects of the value chain created by their product, from raw materials through technological design and david lÁzaro improvement, to management Engineering and and re-use of waste. Sustainability Director Nokia have analysed their CB Richard Ellis Spain products life cycle in order to minimise its environmental impact through all stages of their operation, beginning with extraction of raw materials and ending with recycling, waste treatment and recovery of the materials used. 66 sustainability & energy LEED® promotes a global sustainability focus

  67. The environmental efforts of the new construction company are centred around the methods and standards following three main questions: that enable architects, Selection of Raw Materials. developers and clients The potential for each resource to define sustainable to cause contamination is projects based on measureable parameters Design for Supplier Network Environment Management (DfE) Product & technology development Raw Suppliers materials activities Material content of a typical Nokia mobile device. Reuse recovery Own recycling operations disposal Use End+of+Life Environmental Practices Management (EoL) System (EMS) nokia strives to reduce the possible harmfull environmental impact of products, services, and operations over the entire product life cycle. considered in order to reduce In addition, they explore the the quantity of potentially possibilities of using new harmful substances used. substances and technologies Nokia publish on their website that are less harmful to termoplastics (not containing pvc) the content and definition the environment, such as cu alloys glass and ceramics of potentially dangerous bioplastics, material with a low fe alloys thermosets substances used in their benzene or mercury content, co designs, along with the or using recycled metals al alloys graphite applicable regulations used to and plastics. other metals control each one. Energy efficiency. On this other no metals sn subject, there are two focal li LEED® promotes a global sustainability focus Trends 2009 67

  68. sustainability: david lÁzaro the nokia Engineering and Sustainability Director perspective CB Richard Ellis Spain commitment to sustainability in water; iii) energy efficiency; iv) that all the component parts, if materials selection and v) the correctly manipulated, can be interior environmental quality. reused in the manufacture of This enables buildings to be other components. certified in each category using points: reducing the energy Nokias sustainability a system of credits that ranges consumed by the final products, objectives are not limited to from the basic certificate up to and reducing the operational mere compliance with legal platinum, passing through silver energy consumption of the requirements; they go much and gold. business. This twin concern further. As well as the selection The CB Richard Ellis offices in has been passed on to their of raw materials, the company Madrid, on the 24 th floor of the providers and constitutes has opted for an environmental Torre Picasso, are in the process another selection criteria to strategy for their business of obtaining the same distinction, incentivise them to make locations, as much for their offices the first of its kind in Spain. By improvements in their energy as for their own production this we seek to consolidate our efficiency and use of resources, installations. experience in assessment of which in itself promotes sustainable buildings, in order to sustainability. new property be able to offer these services to Returns and recycling. Nokia standards our clients. undertakes consumer awareness Market demands have driven We have also been able to campaigns to promote recycling the development of new confirm that, in the case of of used devices. They have construction methods and our offices, our investments in created more than 5,000 standards that enable architects, sustainability have achieved a recycling points in 85 countries. developers and clients to define reduction in the monthly energy Production of the 6650 model is sustainable projects based on bill of one euro per square metre. another clear example of their measureable parameters. The comparison could not be One of these, and one that is better; our own offices on the currently in major expansion, 24 th floor consume half of the is LEED®. This acronym, energy that those on the 27 th which stands for Leadership floor consume, when both have in Energy and Environmental a simlar number of staff, similar Design, is a classification working hours and activities. system for sustainable buildings This has been achieved thanks developed by the US Green to innovations in the design and Building Council (USGBC) and use of electrical installations, represents a benchmark in the adequate ventilation, open plan construction of highly energy spaces without interior divisions, and environmetally efficient and through having glazed office sustainable buildings. separations, white furniture and LEED® promotes a global lighting control. sustainability focus by analysing In addition to this valuable the performance of actions in five return (which more than key areas of human wellbeing compensates for the 4% increase and environmental quality: i) in cost), studies of building the sustainable development of certification undertaken the land; ii) the efficient use of by the US Green Building 68 sustainability & energy Investments in sustainability achieve a monthly saving of one euro per square metre in the electricity bill

  69. nokia paris - leed® ci advice In line with this global sustainability policy, in early May 2008 CB Richard Ellis Energy and Sustainability Department in Madrid was contracted to undertake a LEED® CI assessment Council demonstrate that of Nokias future offices in Paris. worker productivity increases The selected building is located by between 2% ands 6% in in the Parc du Millénaire II, at sustainable buildings, and at Rue de la Gare, 35 and comprises the same time staff morale is an HQE® certified building improved and absenteeism is constructed by ICADE. reduced by between 14% and The request included the fit- sustainability 48%. The residual value of the out of 2,150 square metres of according to cb building therefore increases offices set out to provide 120 richard ellis along with the rental savings workstations. Being LEED® The buildings that we live being made. CI, precertification is not and work in every day have a possible, however on the basis very high potential to reduce leed® projects of preliminary assessments energy consumption and carbon for nokia undertaken to date and dioxide emissions. Maximising Nokias first project developed considering the available the performance of existing in accordance with the LEED® timescale, a LEED® CI Gold buildings and intensifying the constructions standards was Certificate can be reasonably use of new buildings has become the White Plains building in achieved. an essential strategy in reversing New York. Currently, Nokia is global warming. As befits one of working to obtain the LEED® nokia milÁn - leed® the worlds largest commercial Gold Certificate in Beijing, China. ci advice property mangers, CB Richard Nokias first LEED® certified On the basis of the results Ellis wants to drive and take a factory is also currently under obtained in the Paris project, leading role in these initiatives on way in Cluj, Romania. the same Nokia team contracted a global scale. LEED® also can be used to assess the Madrid CB Richard Ellis existing buildings, and Nokia is department in July 2008 to studying whether the LEED® EB undertake the the cb richard ellis (Existing Buildings) or LEED® CI LEED® CI assessment for the offices in madrid, on (Commercial Interiors) certificates future Nokia offices in Milan. the 24 th floor of the can be applied to their future In this case it is for the fit- torre picasso, are major refurbishment projects. out of 1,900 square metres in the process of of office space to provide obtaining the leed® 150 workstations. Based on preliminary assessments distinction, the first undertaken to date and the of its kind in spain available timescale, they hope to achieve the LEED® CI Silver Certificate. Investments in sustainability achieve a monthly saving of one euro per square metre in the electricity bill Trends 2009 69

  70. We must look to the future, optimistically, realistically and pragmatically. In doing this, we can continue to look for the best solutions for the market. IN VESTORS AND FINAN CIAL ENTITIES 70

  71. 5 IN VESTORS AND FINAN CIAL ENTITIES Trends 2009 71

  72. (CRISIS): (OppORTuNITy) Those that know Chinese say that the words crisis and opportunity share etymological elements. It seems that there is the same ideogram in each word. Whether it be fully, or only partially true, the possible equivalent originates from the thousand wonders. Especially now, when it seems that we all accept the harsh reality and that the end of the party has finally come. The crisis is all encompassing, it envelops us and hardly allows us to work. True to our temperamental, changeable Latin character we have suddenly done an about turn from the resounding and blind confidence that everything in the future will be better, to the point of internalising that an existential fatalism unlike any other is everywhere. However, at CB Richard Ellis ADOLFO RAmÍREz- we are resisting the temptation ESCuDERO not to look to the future in Executive Managing Director an optimistic, realistic and CB Richard Ellis Spain pragmatic manner, because we are obviously not going to not look for suitable solutions for both the market and our clients. We have the assurance that out of every period of adjustment new opportunities always arise. For a taste of whats to come in the forthcoming years, I dare to propose a three course menu, capable of assuring a delicious and nutritious anti-crisis diet: sale and leaseback, derivatives 72 INVESTORS AND FINANCIAL ENTITIES Investors could direct some 100,000 million Euros in to Sale and Leasebacks

  73. and SOCIMI (the Spanish name which are two very attractive for REITS). I hope that you enjoy options at a time of economic our daily specials. downturn, when many companies need a knight in FIRST COuRSE: SALE & shining armour to help make up LEASEbACk AT Cb RIChARD ELLIS wE for a lack of liquidity. In the coming years, we are going In any case, the sceptics will bELIEVE ThAT DERIVATIVES to see a wave of corporate real immediately ask if there wILL bE AN ExpANDINg AREA estate asset sales in Europe as really is the money out there AND AN ExTREmELy uSEFuL well as in the rest of the world. for these types of products TOOL FOR bETTER RISk Without a doubt, the trend will especially when the real estate mANAgEmENT be more prolific in Europe. sector is going through such Various analyses confirm that at low times and finance issues least two thirds of those property are jeopardising the sector. assets occupied by European Such reservations must be companies are on their corporate answered with a resounding million Euros to these purchases balance sheets. As the availability yes. According to various which is very close to the of credit becomes even scarcer, reports by the CB Richard Ellis annual figures of the current companies are looking for Research Services, investors European investor market. alternative means of finance and are ready to favourably and It makes complete sense for this can come from the proceeds strategically consider these them to find refuge assets in of a sale of their real estate assets. types of opportunities and will moments of such high volatility, Furthermore the capital gains be able to assign several 100,000 as well as acquiring several long generated on low book values, term cash-flows and a natural support fluctuating balance hedge against inflation with sheets and help to recapitalise real estate collateral, which companies. Likewise the guarantees this cash flow for surplus funds generated boost the lifetime of the investment. the purchasing process and However it is fundamental consolidation of companies to establish the solvency of the future tenant in order to determine the viability and the possible price of the operation. Several leading companies in the sector have already anticipated this option and have, with Investors could direct some 100,000 million Euros in to Sale and Leasebacks Trends 2009 73

  74. ADOLFO RAmÍREz- (CRISIS): ESCuDERO (OppORTuNITy) Executive Managing Director CB Richard Ellis Spain by bRINgINg FIIS signifi cant success, applied this will see many more examples of LEgISLATION IN LINE formula to search for real estate these types of transactions over wITh OThER COuNTRIES, for the long term. The two leading the coming months as this is ThE gOVERNmENT CAN Spanish banks have entrusted one of the most effi cient types of hELp TO ALLEVIATE ThE operations of this type to CB transaction in times of traditional Richard Ellis Spain. We have credit shortages. Readers SpANISh CRISIS already completed the Banco interested in this matter can learn Santander transaction, which was more at the following link: awarded a prize in the last edition www.cbre.es/crisisyoportunidad of Expo Real as the best 2008 transaction and are currently SECOND COuRSE: developing the other with BBVA. DERIVATIVES We have previously worked It leaves me in no doubt that with other leading companies in just the mention of this word their sectors such as NCR, Ahold will trigger warning bells in Permira or Telepizza and in each more than one readers ears. It case exceeded our intended is clear that many of the recent objectives. Without a doubt we excesses have been due to the 74 INVESTORS AND FINANCIAL ENTITIES Many companies need a knight in shining armour to step in and make up for a lack of liquidity

  75. poor use of several financial because real estate assets account instruments based on complex for 18% of world wealth (real derivatives strategies. However, estate assets, share and bonds) one can convince the doubting and at the present time only reader that derivatives have two 0.15% is placed in Europes main fundamental possible uses: in real estate derivatives markets the first instance, they allow (United Kingdom, France and one to apply guarantees and Germany), whilst the volume risk management strategies of financial derivative activity compliment the cycle; if one quicker and more efficiently, and quoted on the main European thinks that the downturn will be only in the second instance to markets (Eurex and Liffe) longer and more pronounced, speculate by leveraging on market represents some 119% of the one can take shorter term expectations, which multiply European market. Finally, and positions on the index without the potential profits or losses of perhaps the most undisputed getting rid of one square metre the wager. Hence, it is clear that example, is that they have already of the portfolio. The possibilities only the first use is included as a been fully established in the are very much dependent upon course on our menu. United Kingdom since 2004, each persons vision of the Derivatives are not unheard of where the investment volume in markets and offer transaction in the Real Estate sector. The use real estate derivatives has grown speeds and costs which direct of swaps from variable to fixed annually by 55.4% between 2004 investment cannot offer. interest, is widespread and has and 2007. As with everything, the most saved some of the oldest players It cannot be denied that the key important thing is evidence of on more than one occasion, drive will occur in 2009, with how much one can gain in times such as we are in now. The the implementation of a Eurex of bear markets and crisis, as application of derivatives both exchange, that will reduce the in times of buoyant and bull for portfolio management as well counterpart risk and provide markets. One then only needs as for hedging against real estate more liquidity in this market. to anticipate the direction and exposure via the stock market, Its hedging strategies are wide the intensities of adjustments continues to be fairly unknown in ranging but amongst many others and then carefully hedge the Spain, but it has already burst on and by way of example, I will portfolio risk. Additionally, to the scene with notable force on emphasise that it is possible to derivative prices serve to inform the anglo-saxon markets. eliminate the real estate risk of an and influence the prices of the Why does CB Richard Ellis investment portfolio by changing direct market. To this end, if we believe that derivatives will to a fixed return and without consider the investments data be an expanding area and an selling the assets of said portfolio. in the London office derivative extremely useful tool for better In this way one can gain exposure markets, we see that 25 per risk management? Firstly to a market such as America and cent falls in capital values are because they have been working transpose it into the Spanish expected in 2008, 20 per cent in successfully for many years in system in a matter of days, 2009 and there is not expected to other property markets. Secondly, without selling the assets, or even be any growth until the start of repositioning the product range - 2011. This is not too encouraging passing from residential property a result; but does not appear to be to offices over a set period of time. crazy either. If one estimates that the cycle CB Richard Ellis believes in this will be short, one can adopt opportunity and via an alliance longer term positions to with GFI they have become one Many companies need a knight in shining armour to step in and make up for a lack of liquidity Trends 2009 75

  76. z- (CRISIS): ADOLFO RAmÍRE ESCuDERO (OppORTuNITy) Executive Managing Director CB Richard Ellis Spain lack of purely patrimonial and non-taxed listed collective investment vehicles. All the countries surrounding us are developing them. The current of the first independent brokers capitalisation of Spanish recognised by the FSA. Up until REITs, (FIIs), hardly reaches There is a third and more now, we are market leaders in eight thousand million Euros significant added value to this category, with more than barely 10 per cent of German this. The new legislation will 80% of market share. Those investments and only 80 per help the transfer of real estate who wish to learn more about cent of the capital invested rental properties. For those less this, can find more data on our in Portugal. efficient owners and those that corporate website: With not being liquid listed demand high returns from their www.cbre.es/crisisyoportunidad vehicles and the fact that it is capital such as developers, compulsory for one to invest companies, private investors AND FOR DESSERT: half of ones capital into the or listed real estate companies SOCImI residential sector these dual the new formula will allow To end our hearty anticrisis constraints of FIIs have clipped them to sell on these assets to menu, it is essential to include their wings and hindered their new investment vehicles. With a dessert with clear Japanese uptake in Spain. Hence, their regard to SOCIMIs, the low characteristics. At this point, adjustment to come in line with volatility and the stable long it is likely that the majority of the current systems in other term performance of these assets, readers will already be familiar countries can help alleviate together with the objective to with the draft legislative process the Spanish crisis. Firstly, it create a universal portfolio, to regulate future Spanish REITs will guard against the exodus will allow them to operate with or SOCIMIs (collective investor of national institutional capital returns that are in line with the companies in the real estate to foreign markets with better risk and their capital requirement market). I would therefore prefer regulation, which is what timeframe needs. to focus on the positive effects happened in France. Secondly, To make so many concerns that the new system will bring it will drive the prices of compatible it will be important to the Spanish market, so long portfolio rental assets upwards, that the law establishes an as fundamental pre-determined with tax benefits on the new adequate transitional phase, so aspects are incorporated. legislation sometimes reaching that that the biggest portfolio It is clear that one of the usual more than 10 per cent of the rental property companies have pending issues has been the price of the property. an incentive to pass on their assets to these vehicles without costs that hold back the process. Furthermore, the current state IT IS CLEAR ThAT ONE OF of the market will need to be ThE uSuAL pENDINg ISSuES taken into account to ensure hAS bEEN ThE AbSENCE that the numbers work out OF LISTED COLLECTIVE for the main catalysts of these INVESTmENT VEhICLES vehicles. The freedom to invest in products remains crucial, and it would be highly advisable to set the percentages required for 76 INVESTORS AND FINANCIAL ENTITIES CB Richard Ellis supports the development of REITs on both a national and an international level

  77. investment in assets, which is currently at 90 percent, to a ratio closer to the European average, at around 85 percent. Furthermore in the current economic climate, the real estate market sells less and rents more either because clients cannot buy or they are holding out for lower prices or a bit of both reasons. Be that as it may, they are looking to construct models for the development of real estate capital in the rental sector, so they can offset the excessive losses there has been on stocks in this sector. If said system allows for the transfer of these stocks to the company as a whole, and does so via the transparent and liquid listed markets, whilst at the same time redistributing taxation, in a way that allows for long term capital growth of the private collective in the long term, we will without a doubt see, a necessary and very significant step for both the market and Spanish society. CB Richard Ellis supports the development of REITs both nationally and internationally. and evolve in the best possible They have done so since they way for the whole of the market. were created in the United If you would like to know more States. We have been involved about this issue, or consult with and committed from the international comparative data very start to reaching this goal in on REITs, these can once again be Spain and we want to impart our accessed on our site: knowledge of the sector so that www.cbre.es/crisisyoportunidad SOCIMIs are conceived, created We still do not have the certainty of what the Chinese knew thousands of years ago, but at CB Richard Ellis we create, think... and act as though crisis is a synonym of opportunity. Bon Appétit! CB Richard Ellis supports the development of REITs on both a national and an international level Trends 2009 77

  78. ThE STORy bEhIND ThE SCENE The prize awarded by Euromoney for the most important transaction of 2008 is the culmination of a project that has included many professionals from CB Richard Ellis Spain. Propinvests acquisition of and leaseback of more than 1,165 Santanders City of Finance for assets in Spain. more than 1.9 billion euros, We and the bank both knew purchased in a depressed that this was an unprecedented economic environment and sale in Spain. Never before had in the face of an inhospitable a sale of such magnitude been financial environment, makes organised, so its success left this business success taste a lasting impression on even sweeter. all concerned. Banco Santander, a pioneer in The sales strategy agreed upon the application of a formula for with Santander was to divide generating liquidity and asset the assets into various lots, appreciation, has committed, according to class, geographic both to the corporate growth segment and investment volume, of the group as well as to the and thus to generate the greatest improvement of its capital ratios, possible interest from various with the more than 4.4 billion investor profiles. euros it has gained from the sale During the initial phase, a fast- track period was authorised, a brief space of time in which JAVIER kINDELAN negotiations were entered into National Institutional with possible buyers for all of the Investments Director assets in one lot, without success. CB Richard Ellis Spain Instead, the agreed splitting of the assets in to smaller lots quickly bore fruit. Pontegadea, a holding company belonging to Amancio Ortega, acquired the first three lots consisting of 11 outstanding buildings, for nearly 440 million euros. The next challenge was to pull off the sale of some 1,150 branches divided into small lots. In this case, the winner was Pearl, an Anglo-Saxon insurer that was not 78 INVESTORS AND FINANCIAL ENTITIES Pontegadea acquired the first three lots for close to 440 million euros

  79. Of the sea of olive trees that surround the City of Finance, the most conspicuous is the one located at the main entrance. This ancient olive tree, of one of the usual suspects. It laid Arab origin and measuring out more than 2.04 billion euros, bANCO SANTANDER wAS more than five metres high, which guaranteed the success of ThE pIONEER IN AppLyINg A must have been a sizeable the project to date. FORmuLA TO gENERATE LIquIDITy investment since, when it was For the curious among you who AND CApITAL gAINS being planted, Mr. Botín hinted may be asking themselves how that it should be insured. The the more than 2,300 sale and anecdotal part came when a leaseback documents could be into a retrenched market that regional offices. Their logistical policy worth a million euros signed, I will only say that the symbolised a cyclical change and professional skill has was presented to him for the response was innovative and which later defined itself as a allowed for a success of a unique olive tree; what Mr. Botín was avoided the signing of thousands crisis. These difficulties served to instruction. really proposing was that the upon thousands of pages. underscore the success of the sale There were many tales to be told ropes holding the thing upright and the subsequent Euromoney as well. For the weekly CF (City should be tightened. CITy OF FINANCE 2008 award. The reality is that of Finance) meetings, which The successful sale of the What posed the greatest challenge it was sold in a very volatile soon became daily, you had to property has allowed CB was the sale of the last lot, market, simultaneously affected arrive more than half an hour Richard Ellis to emerge comprised of Santanders City of by the credit crunch and the lack early in order to get through stronger, to continue leading Finance -- a real estate behemoth, of financial liquidity, which led all the security filters and the unique projects, and thereby which found itself plunged to the sale not fully being closed labyrinthine walkways that take to gain experience and a track until the summer of 2008. you to the various ecosystems. record, which will in turn From this experience we can Because, in the City of Finance, strengthen and secure its take away interesting anecdotes every building is named after the relationships with its clients, as well as business triumphs. ecosystem: pinar (pine grove), sowing the seeds for a future We should praise the arrecife (reef), etc. that will allow it to repeat and compromise and precision Client visits were made more achieve greater goals. The olive of all the CB Richard Ellis comfortable thanks to the tree will probably attest to those professionals who participated customer service team and new contracts. in this project at one point or to guided tours through the another, such as the Valuations complex which among other department, as well as Capital things, houses one of Spains Markets and the different most outstanding golf courses. Pontegadea acquired the first three lots for close to 440 million euros Trends 2009 79

  80. SpECIFIC REAL ESTATE FINANCINg One of the main issues to be considered when acquiring ExpERIENCES profitable property abroad is financing availability and conditions, as this is the key to a successful investment. CB Richard Ellis EMEA Debt Advisory has accumulated extensive experience in this area over the years. Among other advantages this experience has provided our clients with a clear overview of the market situation at any given time, a result of our constant interaction with financial entities and our pan-European platform. They rely on us to calibrate their JuAN CARLOS buJEDA financing expectations before Debt Advisory making any offers on assets and, Associate Director having delegated these banking CB Richard Ellis EMEA functions, they can then dedicate more time to focusing on their businesses. In line with this proactive attitude and day-to-day practice, over the following pages we will project the possible development of the financial system based on the current situation, measuring its impact on the real estate financing market. An outline will also be given of the 80 INVESTORS AND FINANCIAL ENTITIES The financial system is undergoing a complete overhaul

  81. advisory services rendered by costs for already scarce capital, CB Richard Ellis to the LAR may meet the high profitability Group in its search for financing requirements of investors. in an ever-changing market. The financial system is undergoing a complete pERSpECTIVES ON overhaul. Where capital ThE FuTuRE OF REAL once was treated like a ESTATE FINANCINg commodity now the tables When this article was sent to have been turned, and it has press at the end of October become a scarce and valued 2008, the process involved in asset, to which only the top seeking real estate financing and developments will be granted In addition to the conservatism the very nature of the financial access in the coming years. adhered to by bank risk system itself had undergone 12 All indicators point to a not- committees, the financial world months of radical change. One so-distant future where the is also facing a new paradigm of the few trends that could market will be characterised when it comes to transferring be clearly distinguished in the by an eclectic combination of liquidity from savers to midst of this financial turmoil financing companies, each with investors. Nevertheless, the was the profile of the entities its own profile and preferences perfect timing between the that will leverage the sector in regarding margins, leveraging, maturity of the securities the future, once the troubled payment terms, asset types and issued and the loans extended times have passed. guarantees. make securitisation a highly It goes without saying that The process involved in efficient way to arrange bank intervention by western seeking financing is set to financing. If one lesson has governments in their financial become increasingly complex been learned at the close of this entities will lead to a period and even more tedious. The cycle, however, it is that banks of enhanced bank supervision, image of one bank providing resulting in increased risk the entire debt at a set price aversion and higher financing has been replaced by a series costs. Simultaneously, and in of formulae providing senior response to this phenomenon, debt, subordinated debt and ThE SECuRITISATION FINANCINg a series of private capital funds preferential shares. In fact, mOTORwAy hAS bEEN ShuT have been created to finance the only way to reach the OFF TO TRAFFIC FOR AN operations within the real leveraging levels we are used to uNSpECIFIED pERIOD estate sector, an area of activity will be through a combination which, given todays rising of all these options. The financial system is undergoing a complete overhaul Trends 2009 81

  82. JuAN CARLOS buJEDA SpECIFIC REAL ESTATE Debt Advisory FINANCINg ExpERIENCES Associate Director CB Richard Ellis EMEA as in this scenario assets and Hypovereinsbank, part of the liabilities do not fall due Unicredit group. In addition, we simultaneously. Securitisation are currently analysing a range will undoubtedly return, but of further transactions with the currently it is unknown exactly Group. how and when this will occur. Frequent communication with In conclusion, financing the various German financial and liquidity will return entities and our understanding to the markets, but not as of financing conditions has a commodity available for allowed us, right from the all developments, and debt outset, to calibrate operations in should retain the responsibility will have to be marketed and a competitive manner, meeting for the securities they issue. structured successfully to client expectations regarding The securitisation financing appear attractive. Companies the structure of financing offers, motorway has been shut off to will have to be sure that, of all margins, leveraging, terms, traffic for an unspecified period, the formulae available, they cancellation commissions, and when it opens again there are choosing the one that best interest reserves and cash flow will be a lower speed limit and fits the particular requirements or market data projections, a licence points system. of each project. At CB Richard as well as helping them to A combination of prudence Ellis EMEA Debt Advisory we present their investors with a and responsibility is what work diligently hand in hand profitability analysis for their classifies the pfandbrief with our clients to ensure that projects. (German covered bonds) this goal is met. We are also currently involved market, an instrument which in various added value projects has been key in providing SpECIFIC ExpERIENCE which, just like development liquidity to this countrys banks IN CROSS-bORDER projects, have additional over the past year. In turn (as FINANCINg complexity: not only to we have been able to observe At the start of 2008 and as one of demonstrate to banks that the from our central position in the milestones for this strategy, projections are reasonable and the regions capital markets), we established a framework that, for example, the rentals this has allowed Germanys agreement with the managers of proposed in the cash flow can be banks to remain among the a real estate investment vehicle achieved once the empty spaces most active in Europe, albeit (not a real estate investment are re-leased, but also that the at an understandably slower fund), the LAR Group, with the client is taking the necessary pace. It is not surprising that objective of acquiring profitable steps to mitigate any risks in this the pfandbrief principle has assets in France, Germany and regard through an efficient cash begun to substantially replace Eastern Europe. flow management agreement securitisation as the main From the outset the LAR for both parties, in the event instrument for financing assets. Group and CB Richard Ellis that the financial covenants The alternative, a possible have enjoyed a close and stipulated in the contracts return to a traditional banking intense relationship. Together model where depositing entities we have analysed a huge extend long-term loans but are number of possibilities, financed in the short term, is successfully closing two neither feasible nor efficient in operations in Germany: one with the current economic climate, Eurohypo and the other with 82 INVESTORS AND FINANCIAL ENTITIES Debt will have to be marketed and structured successfully to appear attractive

  83. it entered the market, placing us financial system means that in an ideal position to identify it is impossible to be certain possible financing participants. of the exact conditions under Following the choice of entities which a loan will be extended, with which the transaction and consequently it is essential will move forward, and once to have a plan B, and even a the due diligence process has plan C. Maintaining in-depth been completed (perhaps the negotiations with various entities most tense moment of the at the same time is a tedious and negotiations), the financing time-consuming task, but is the are not met. Our clients can an exclusivity period granted contract is finally signed. It is most effective way of ensuring clearly see that one of the by the seller. The first step must important to arrive at this stage that the transaction is closed as major advantages of working always be to bring together all with more than one entity, soon as possible and under the with CBRE Debt Advisory is the commercial, technical and as the terms and conditions most favourable conditions on the international network that financial information relating signed at the end of the process the market. supports our analyses, helping to the project in a detailed may vary greatly from those The process of financing assets us to convince banks of the study, thereby avoiding any presented initially. has become long and complex, feasibility of the business plans surprises when it comes to bank As previously mentioned, especially if it needs to be we present. evaluation time. German entities are rapidly done quickly and efficiently. It is crucial that these This evaluation stage is crucial flocking to the pfandbrief market Detailed knowledge of the parameters are considered within a financial model that to obtain liquidity. Today banks market is needed, understanding and clarified in advance, as reflects the clients commercial frequently include clauses how entities structure their properties with a high risk of and financial expectations. It whereby they reserve the right operations, and experience re-leasing are financeable within is always useful to explicitly to subject financing terms and in dealing with legal issues a project finance context, but identify the factors that will conditions to market conditions, and knowing which banks are the conditions imposed by mould the banks attitudes into which may lead to surprises in financing and when are also key banks may turn out to be fairly a feasible formula for its clients. financing costs and the leverage factors. Our experience with the burdensome. If negotiations are Implementing these measures obtained. As a result multilateral LAR Group shows how it is still not carried out effectively, then will bring us closer to a non- negotiation with entities is possible to obtain financing in control over the project may be binding financing offer which, crucial because, so long as there the current market, but only by easily lost and it is important with a little luck, will be in line is no signed written contract, being well-organised and having that the borrower remains with the actual situation once the changing nature of todays realistic expectations. flexible when it comes to dealing an agreement is reached with with situations of non-payment the bank. in the most efficient manner. In between making its initial The right steps must be taken offer and the final binding offer, IT IS NOT SuRpRISINg ThAT throughout the process for and depending on the size of seeking financing to ensure the transaction, the bank will ThE pFANDbRIEF pRINCIpLE that it is linear and not circular, let the client know whether a hAS bEguN TO SubSTANTIALLy particularly when working with syndicate will be required with REpLACE SECuRITISATION AS other entities. This process will ThE mAIN INSTRumENT FOR be carried out through the Debt FINANCINg ASSETS Advisory platform, whether because of frequent contact with the bank or because it has been in charge of the operation since Debt will have to be marketed and structured successfully to appear attractive Trends 2009 83

  84. The markets tend to create value and business opportunities in a situation where initiative, creativity and perseverance are needed more than ever. MARKET TRENDS 84

  85. 6 MARKET TRENDS Trends 2009 85

  86. REAl ESTATE AucTioNS: MARKETiNg New real estate formats chANgE are needed and internet real estate auctions are going to be one of the tools that will stand out the most. For service industries, being proactive and studying the market is no longer enough. They must anticipate the best response to their clients needs. Such is the case with Internet real estate auctions, one of the most innovative ways of taking the lead in the real estate sector. From now on, adaptability will be the key to success. A market crisis brings activity to a standstill in some areas, but EMilio MiRAvET at the same time opens up new New Marketing Channels Director channels, trends and strategies CB Richard Ellis Spain through which to reemerge. In the future, those who know how to anticipate those changes will be in a better position than those who wager on merely remaining inactive. Volatility and financial turmoil have all out affected the real estate market. Nothing will return to how it was before. Investors, agents, real estate developers and end-users need to reinvent themselves, in order 86 MARKET TRENDS In just a few short months, CB Richard Ellis online auctions have garnered a considerable response

  87. to transform their activity and recover their positions. New formats are needed, and due to their unusual capacity for segmentation and client reach, telephone auction project (www. A SuiTAblE SElEcTioN AND Internet real estate auctions tusubastacbre.com and 902 21 DiviSioN of iNvESToRS, AgENTS are going to be one of the most 01 30). It has already closed four AND cliENTS cAN iN TiME outstanding tools. national auctions with an initial PRoviDE A vERy coNSiDERAblE The Internet is an excellent offering of some 500 homes, way to bring buyers and sellers several historic estates, plots AND EfficiENT DATAbASE together in a time of change of land and a hundred retail in the real estate market such units and logistics warehouses. as the present. Moreover, a They have targeted end-users suitable selection and sub- and various types of investors, division of investors, agents and with properties coming from clients can in time provide a both individuals, seized assets, very considerable and efficient financial institutions and allows for the conveyance of database for fulfilling needs, developers. offices, retail units, industrial fine-tuning products and buildings, newly constructed stimulating transactions in PRoAcTiviTy houses, buildings, investment the different sectors. AND MARKET PRicES properties, plots of land and In the last few months, This represents a first step seized assets. I.e, to put quality CB Richard Ellis has completed towards an integrated system assets on the market by means a comprehensive Internet and of real estate marketing data of a sales system that is both communication. We consider transparent and accessible to the it to be a new channel with general public. For this reason, national coverage and of far we have chosen high end online reaching potential, especially auctions, the most transparent useful in real estate sectors and proactive formula for in need of information and transparency. The aim is to popularise a multi- segment business model that In just a few short months, CB Richard Ellis online auctions have garnered a considerable response Trends 2009 87

  88. EMilio MiRAvET REAl ESTATE AucTioNS: New Marketing MARKETiNg chANgE Channels Director CB Richard Ellis Spain cb RichARD ElliS 13 and 37 percent for properties AucTioN wEbSiTE hAS located in Madrid, Barcelona, AlSo ShowN iTSElf Málaga, Valencia, Alicante, To bE ESPEciAl ly Zaragoza, Mallorca, Murcia, EffEcTivE iN REAl A Coruña, Asturias, Toledo, Cádiz, Guadalajara and La Rioja. ESTATE SAlES foR More than 13,000 potential iNvESTMENT PuRPoSES buyers have registered on the auction website in just a few transformations of huge crises. months. Each client fills out a At CB Richard Ellis, we have very simple form. In order to taken this in to consideration, by bid on a specific product, he or incorporating a New Marketing she must put down a deposit of Channels department into one percent of the opening bid. our corporate structure. We After the final bid, and if he or are convinced of its future she ends up the highest bidder, a importance. In Spain, real estate traditional sales contract process sales formulas have not been will take place. modernised for a long time, with the result that there is a margin ANTiciPATiNg chANgE for substantial improvement if It is often said that in times we can reconcile the conflicting allowing both parties to agree on of crisis the pace of change demands of consulting, a market price, that is the price accelerates, a principle which marketing and publicity. Because at which both the buyer and is especially applicable to of its size and national as well the seller are capable of closing the business world. In the as international experience, the deal, aside from the specific extremes of each business CB Richard Ellis is in the best business cycle we are in. cycle, businesses that fail to position to realise this process, In just a few short months, CB adapt to the new climate have and we intend to continue Richard Ellis online auctions difficulty surviving. Hence, it promoting these both in the have garnered a considerable is recommendable to always be medium and long term. response. It is an effective a few steps ahead of the trend In fact, CB Richard Elliss method of securing prices and both with regard to new day-to- auction website has also shown products in response to the day unexpected developments itself to be especially effective ever-evolving needs of end- and with regard to sudden in real estate sales with regard users. It offers differentiation, to products such as industrial segments clients, analyses properties, business premises, unsatisfied demand in real time plots of land or offices ranging and guarantees proximity and from a rambling, late baroque creativity to a market that is country estate in Cádiz, to plots clearly in correction. with planning permission or To date, discounts at these five industrial warehouses with auctions have been closed with adjacent land for a starting price an average discount of between of 2.2 million Euros and a market discount price of 42 percent or a retail unit in Madrid with a starting price of 108,000 Euros. 88 MARKET TRENDS In the extremes of each business cycle, businesses that fail to adapt to the new environment have difficulty surviving

  89. ouR EXPERiENcE ENDoRSES uS CB Richard Ellis experience and comprehensive client database built up over more than 35 years in the Spanish market is sufficient to attract properties from both investors as well as agents. We provide a quality and effective service and specialise in each sector. We also provide a creative and innovative way to update the greater sector experience in real estate consulting, and the ability to adapt it to changes taking place in each Spanish city and region. We can do this in real time, with a tool which is capable of regenerating itself and sub-dividing offers and buyers that are constantly changing. We listen and respond in real time, both to demand as well as supply, in order to facilitate bringing them physically and temporally closer to obtaining a market price in the nimblest and most proactive way. Our task is to position the auction web page as a permanent channel of We also count on the fact that we properties on the market, where are the international leader in the the general public can access and sector, a key factor for attracting acquire a home and investors can future clients and investors in track opportunities. a globalised world. I am certain that in the next issue of Trends we will be talking about that second platform. In the extremes of each business cycle, businesses that fail to adapt to the new environment have difficulty surviving Trends 2009 89

  90. hoTEl iNvESTMENT iN SPAiN: Developers are now the chANgiNg RolES main vendors, whereas corporations, funds and investment groups are taking their first steps into the market. With the Spanish real estate market restricted by uncertainty, hotel investment has been reduced by half. The remaining activity has been shared out between the unprecedented prominence of developers in the sales area, the emergence of a highly varied group of investors and profitability that is clearly on the rise. 2008 has been one of the most turbulent years in the history of the Spanish economy as a whole, with a particularly harsh impact JoRgE Ruiz on the real estate sector. Initial National Hotels Director signs of an economic slowdown CB Richard Ellis Spain were already on the cards in the second half of 2007, although the sharpness and intensity of the sudden drop took everyone by surprise. It is likely that the sudden tightening of credit terms by the financial markets, coupled with accumulated stock of almost one million unsold homes, have compounded the negative consequences, leading to significant changes to the Spanish real estate map. 90 MARKET TRENDS Urban tourism, less seasonal than holiday tourism, has begun to diversify the range of tourist services on offer in Spain

  91. Developers have suddenly lost the central role they had played in prior years, and in many cases they seem to be drowning in a sea of debt, unable to continue with their businesses. Many have been forced to sell off assets to meet their debt commitments and not get swept away in bankruptcy proceedings, a fate already suffered by a number of their counterparts. The real estate baton has been passed on to a number of investors from a wide range of backgrounds but with ThE MAiN iNTERNATioNAl one thing in common: their hoTEl chAiNS ARE PlANNiNg liquidity, probably the most To gRow iN SPAiN ThRough sought-after asset of the entire ThEiR DiffERENT bRANDS SuDDEN PluMMET year. Real estate funds from AND iN ThE DiffERENT Trends in the tourist sector diverse backgrounds have MARKET SEgMENTS have not done much to help gained ground, ranging from the situation. An overly mature German core funds to the more Spanish holiday market, opportunistic American funds. from a highly expensive market, market would not be affected by increasing vulnerability when National family offices have but have now come to the fore the general decline in the sector. faced with competition from also significantly increased their again due to their liquidity and In the end financing difficulties new destinations and a surplus prominence. In recent years the current difficulties faced also made their mark on this in hotel developments in urban they had remained removed by property owners, ready to sector, and property developers areas such as Madrid, Barcelona accept significant depreciation suddenly halted all activity, and Valencia have also been of their assets. despite having been the driving decisive factors in the 43% At the start of 2008 many force behind the investment drop in investment during the experts believed that, due to its boom in previous years. year, slipping from 1.3 billion highly specialised nature (not Euros invested in 2007 to characteristic of other real estate only 750 million Euros in the segments), the hotel investment following year. Urban tourism, less seasonal than holiday tourism, has begun to diversify the range of tourist services on offer in Spain Trends 2009 91

  92. hoTEl iNvESTMENT iN SPAiN: JoRgE Ruiz National Hotels Director chANgiNg RolES CB Richard Ellis Spain urban market and reaching 9% for the holiday home market. All signs indicate that this trend will continue, and may even pick up speed should difficulties persist when it comes to financing transactions. If this is the case then we may see distressed hotel sales, led by opportunistic funds in circumstances where creditor banks prefer not to take on the hotels they have financed. Difficulties in accessing the It is highly likely that all these credit market have meant that questions will be answered over only two operations worth over the coming quarters. 75 million Euros have been closed during the year, and in A lEThARgic both cases the vendors were TouRiST SEcToR real estate companies in dire to Oncisa, part of the ONCE This wave of change has been need of liquidity. Habitat sold Group, for 42 million Euros. accompanied by a general its five star Barcelona project The aforementioned downturn in the domestic tourism Habitat Sky to Sol Meliá for 103 transactions, along with sector. The main indicators reflect million Euros, while MedGroup various others that are still that the slowdown of domestic sold off its budget hotel range awaiting a buyer, have one tourism has already led to a drop operated by Express by Holiday thing in common: a real estate in average hotel occupancy, down Inn to Portuguese company vendor that needs to generate 2.5% year-on-year at September Grupo Continental for 140 cash, forced to sell its most 2008 according to figures from million Euros. liquid assets, almost always the Spanish Tourism Studies Other significant operations hotel establishments or office Institute. This is, however, a included the sale of the Hyatt premises. In this manner the small decrease which should be Casares Hotel in Málaga, owned traditional roles have been interpreted positively, as it has by property group Evemarina reversed: developers have occurred against the backdrop and purchased by the Qatar stopped investing and have of a poor economic climate and National Hotels fund for 70 now become the main vendors, shows that urban tourism, less million Euros; the sale of whereas business corporations, seasonal than holiday tourism, has Madrid hotel Bauzá by Habitat funds and investment groups for 60 million Euros, and from a wide variety of the sale of the Confortel 22@ backgrounds are taking their hotel in Barcelona by Nozar first steps into the market, with profitability that clearly exceeds the cost of the money involved. Generally speaking, profitability levels have undergone huge increases of between 75 and 100 basis points, fluctuating between 6.5 and 6.75% for the 92 MARKET TRENDS One of the most active companies in Spains recent hotel panorama has been Confortel

  93. MANAgEMENT coNTRAcTS ARE STARTiNg To bE AccEPTED by ThE MAJoRiTy of coMPANiES ThAT owN hoTElS AND hoTEl DEvEloPMENTS begun to gradually strengthen Spanish National Statistics example of the fierce price war the range of tourist services on Institute. Aside from any other that is being waged online, now offer in Spain. Even so, this fall possible interpretations, this affecting various Spanish cities. in hotel occupancy rates will average decrease may show In this environment the sector probably begin to pick up pace if that the slump in consumption seems to have bypassed the the current economic uncertainty may end up affecting tourism economic slowdown and closed persists for much longer. spending, thereby forcing hotel a stable year, in line with its The aforementioned drop in chains to offer more attractive occupancy has had a slightly prices. Capturing customers has toned-down effect on average now become the key to survival prices, which showed a year-on- in a market that is becoming year decrease of 1.3% according more competitive by the minute. to accumulated data from the Barcelona is perhaps the best One of the most active companies in Spains recent hotel panorama has been Confortel Trends 2009 93

  94. hoTEl iNvESTMENT iN SPAiN: JoRgE Ruiz National Hotels Director chANgiNg RolES CB Richard Ellis Spain As they have a smaller presence in Spain than in its European neighbours, these groups have a great interest in gaining a corporate share of a hotel market with the maturity levels seen in the Spanish sector. The consolidation of these brands is such that their very name is enough to catch the eye of international investment groups, which seek to acquire hotel developments to then transfer their management on to other parties. Also of note is the fact that the main international chains are planning on growing in Spain through their various brands and in all segments of the market, even the budget sector. This may indeed be the area with the clearest future and interest rate lows many focused greatest potential, as it meets the their expansion on purchasing requirements of many businesses land and hotels that were to cut costs when it comes to already up and running, or even organising business trips. acquiring other chains, options As large international hotel which have become increasingly chains usually operate their complex due to rising difficulties properties through management in obtaining financing. contracts, this way of working European counterparts. In any Large international chains such is becoming increasingly case, it is too early to rule out a as Hilton, Intercontinental, worsening of the situation, and Marriott and Starwood have the sector should proceed with taken advantage of the situation. caution over the coming months. Even though in recent years they had played a minor role in A chANgE iN RhyThM a market dominated by highly This role reversal has also aggressive purchases from local reached hotel chains, the chains and property companies, second most important players now that these players have on the market, with the credit lost their interest the more and market slump forcing the powerful international chains are majority to modify their growth undertaking extremely ambitious strategies. During all-time expansion plans. 94 MARKET TRENDS Growth is linked to rental contracts and management

  95. commonplace among the ThE lARgE majority of hotel owners and iNTERNATioNAl chAiNS developments, despite not having formed part of the ARE uNDERTAKiNg Spanish hotel tradition. vERy AMbiTiouS PlANS Meanwhile the large domestic chains, such as Sol Meliá, NH and Barceló, tend to continue to focus on growth in international markets, while still keeping an eye on the Spanish market for any opportunities that may arise. coNfoRTEl, oN ThE hotels operating in Spains main looKouT foR iNvESToRS cities, the companys strategic Against the current backdrop plan aims to incorporate a all signs seem to indicate that further 17 between now and the most widespread strategy 2011. In this light the company among hotel chains will be to has recently contracted CB continue striving for growth in Richard Ellis to act as exclusive hotel operations through lease consultant in the search for and management contracts. This new investors to accompany is the most logical expansion Confortel in its future expansion. model for any company with The aim is to include interested hotel management as its core investors within a framework business, and which can transfer agreement, whereby they its assets to companies with a will have the possibility to profile more suited to the real acquire hotel assets in large estate sector. Even before the Spanish cities which they will current economic crisis various then lease to Confortel for a chains have maintained this minimum of 15 years, with the expansion strategy for years, entire process guaranteed by first applied by the large the institutional backing of the American chains. ONCE corporation. Confortel One of the most active will also assume the investment comes with the additional companies in the recent Spanish in each hotels furniture and guarantee of a group with hotel panorama has been equipment, an interesting proven solvency. In this time of Confortel Hoteles, part of the additional profitability for each significant market change, CB ONCE Business Group. With 17 transaction. Richard Ellis has not failed in its For CB Richard Ellis this quest to contribute new ideas, engagement will provide the creating value and business investor market with a product opportunities in an economic that is solid, efficient, offers climate where, more than profitability in line with the ever, initiative, creativity and current economic climate and perseverance are the key. Growth is linked to rental contracts and management Trends 2009 95

  96. DiffERENTiATioN iN ThE lighT of globAliSATioN: ziElo ShoPPiNg Globalisation is affecting all aspects of social and PozuElo economic activity, and retail is no exception. A significant number of retailers are embarking on a quest beyond their local markets. Opportunities are being identified in other countries and continents, and their sights are set around the world. Fortunately or unfortunately, depending on how one looks at it, retail is becoming ever more similar in cities as far away from each other as Vancouver, New York or Paris, to name but a few examples. Everyone is aware that operators AlEX bARbANy in the luxury market now National Retail Director have a greater exposure on the CB Richard Ellis Spain global market. With a strategy focused on high margins and lower product turnover, new markets can be accessed via the selective opening of one or two strategically located shops in each country. The entry of this type of operator; whether in countries with developed or emerging markets, often serves as a precursor to the arrival of other mass consumption retailers. In terms of the general 96 MARKET TRENDS More and more retailers now have strategies of a markedly global nature

  97. globalisation of the sector, the global economies (in addition activity in fashion and accessories to the United States, this would presents a greater degree of include Japan, Germany, France internationalisation, that includes and China), its exposure would both brands such as Zara, H&M be increased up to 57 percent. If ziElo ShoPPiNg PozuElo, or GAP, and luxury brands whose it were even a little greater, say activity is centred on fashion entry into the ten leading global DEvEloPED by ThE uNiTED or accessories (Prada, Versace economies (it would be enough STATES REAl ESTATE fiRM or Polo Ralph Lauren, among to include the United Kingdom, hiNES, iS AN iNNovATivE others). Italy, Spain, Canada and South lifESTylE-coNcEPT ShoPPiNg Within this context, European Korea), it would have access cENTRE, which iS ThE fiRST markets show greater to practically three-quarters of iTS KiND iN SPAiN international opportunity than of the worlds gross domestic Asian or American countries. product. With information and This is due to a combination communication technologies of factors, among them the as powerful as they are today, peculiarities of the geopolitical retailers now have all the tools context in Europe, the expansion needed to reach out to their new of the European Common Market, customers throughout the world. the introduction of the euro and Given all of the above, it should need to be resolved in order to many of the new trends, brands the close cultural and historical also be added that there are operate successfully. However, and concepts on the European ties between its countries. a host of challenges facing those stumbling blocks do scene are paraded and even The size of a market, measured in retailers when they decide to nothing to prevent there being premiered. Among some of the terms of the size of its economy, enter new markets. The vast more and more retailers with biggest new names to be seen on is not the only factor considered majority have to make some strategies of a markedly global this street and its surrounding by a retailer when outlining its concessions in order to adapt to nature. One only needs to take a area, which themselves make the expansion plans, but it is evident the peculiarities of each market. glance, for example, at Wenceslao trip worthwhile, are Abercrombie that, the greater the economy Cultural and language differences, Square in Prague, at Kalverstraat & Fitch (as well as Hollister, behind that market, the greater management control, the legal in Amsterdam or at Tokyos its brand in shopping centres), the opportunities that will arise. framework and legal obstacles, world-famous Ginza Avenue to Apple, Armani Exchange, Uniqlo By being present in just one logistics and suppliers and see firsthand the effects of this or COS (H&M Groups new market such as the United States, the search for local partners or globalisation. brand). It is more than likely that a retailers has access to almost 30 franchisees are all matters that we will soon see these brands in percent of the worlds GDP. foRThcoMiNg SToPS Spain, as well as in other leading If this presence were to be Londons Regent Street stands European markets, within a extended to the five leading out as the great stage on which period of between two or three More and more retailers now have strategies of a markedly global nature Trends 2009 97

  98. DiffERENTiATioN iN ThE lighT of globAliSATioN: AlEX bARbANy National Retail Director ziElo ShoPPiNg PozuElo CB Richard Ellis Spain they usually do so in several mention but a few. Although centres simultaneously and the location is an essential element wow factor that they create for the success of a shopping is somewhat diluted. All of the centre, it is not everything. Zielo above complicates the tasks of Shopping Pozuelo, which is shopping centre developers, being developed by the United who are forever in search of States real estate firm Hines, is innovative and distinctive ways an innovative lifestyle-concept to differentiate their product shopping centre, and is the first years after their opening in the from the competition, in order of its kind in Spain. It is aimed at United Kingdom. to avoid the cloning concept, a discerning public, and is noted With but a few exceptions, such which these centres are often for its distinctive retail offering, as Primark (due to its need for criticised for. both in terms of its retail mix, large surface areas, that greatly The world is full of retail with the most prestigious brands, restricts its presence on the developments located in the and in its quality and sustainable high street), most of the retailers heart of major cities, such as architectural design. entering Spain opt for a flagship the Queen Victoria Building, Pozuelo de Alarcón is a strategic store on one of the main shopping on George Street in Sydney; location for a shopping centre streets in its larger cities. This Quartier 206, on Friedrichstrasse with these characteristics and means that, as a general rule, it is in Berlin or the Victoria & Alfred is in a unique surrounding area difficult for shopping centres to Waterfront, in Cape Town to for the development and the attract new brands that are not yet implementation of this new present in that market. lifestyle-concept shopping centre: In addition, when these new It has the highest per-capita brands decide to make the income in Spain. leap in to shopping centres, By 2009, the Zielo Shopping Pozuelos catchment area will include more than 1.5 million people, with 212,000 of residents located less than ten minutes from the shopping centre, and nearly 40,000 more in the areas industrial parks and major businesses. Its average annual population growth is almost double, and one out of every two residents is between 30 and 65 years of age. Its 16,000 square metres of gross lettable area called for innovation. Hence the shopping centre is a new concept for Spain in terms of size, design, layout and merchandise offering; its origin and formula come from the 98 MARKET TRENDS Abercrombie & Fitch, Apple, Armani Exchange, Uniqlo or COS stand out on Regent Street

  99. United States. Among its most iT will bE A lANDMARK distinctive features are: EuRoPEAN ShoPPiNg A retail offering based on existing top-flight brands that cENTRE wiTh SuSTAiNAblE until now have never or rarely ARchiTEcTuRE AND will bE ThE seen in Spanish shopping fiRST To bE AwARDED ThE lEED centres, in order to offer visitors Si lvER cERTificATioN a mix of establishments that provide for a truly distinctive shopping experience. Certification (an international The globalisation of retail is a Its own specific features. It assessment system developed by fact; we are probably now seeing will host brands and activities the US Green Building Council the initial stages of this process. best adapted to the lifestyle -USGBC- which measures the Hence, more and more, a good of its potential customers, impact of buildings on both the location, access and retail mix in exclusive and innovative environment and on the health are going to be important, but surroundings that are expected one professionally managed and welfare of its occupants). by no means sufficient. In the to become the benchmark for property, in a pleasant In addition, the building blends future, visiting a shopping fashion and leisure in Madrid. environment with good access perfectly into its surroundings, centre must be a real experience It follows the line of lifestyle and plenty of parking. with glass façades which change in itself, something that not all centres: the projects main colour, reducing its visual impact of the new shopping centres in driving force is its overall retail TEchNicAl-ARchiTEcTuRAl to a minimum. the pipeline have. All thats left mix. Therefore it flies in the ASPEcTS At present, the main European to do now is wait until Autumn face of the traditional concept The buildings central space will development focus for larger, 2009, to begin enjoying Zielo of large anchor stores (i.e. large have a textile roof, which will spectacular shopping centres Shopping Pozuelo. specialist stores). It seeks to allow natural light to flow on to is in countries with developing combine some of the most all the floors, creating a sensation economies. Examples are mega- striking and original concepts, of open space. projects such as Moscows Mall of from both the high street and Visitors will be able to easily find Russia, (108,000 square metres of shopping centres, under one their way around, as all the shop gross lettable area), Kievs Mall of single roof, with the consumer windows will be visible from any Ukraine, (140,000 square metres) benefitting from having the floor, as they face on to the vast or Istanbuls The Forum (172,000 finest brands concentrated in central atrium that runs from the square metres). top to the bottom of the building. High quality projects continue to Escalators and glazed elevators be developed In Western Europe, will connect all of the floors. such as the Westfield London There will be spectacular Shopping Centre, which was terraces located on the top floor, recently opened in the British for restaurants and leisure, with capital. Despite the obvious excellent views of Madrids differences in size and concept new skyline. with regard to these projects, The project has been designed to Zielo Shopping Pozuelo is become one of Europes landmark aiming to become one of the most shopping centres with sustainable striking and innovative shopping architecture, and will be the first centres of all those that are soon to be awarded LEED® Silver to open their doors. Abercrombie & Fitch, Apple, Armani Exchange, Uniqlo or COS stand out on Regent Street Trends 2009 99

  100. In 2008 we organised eight seminars which were attended by more than six hundred senior figures from companies, funds, businesses and real estate agencies. BARoMETER 100

  101. 2 BARÓMETRo 7 BARoMETER Trends rends 2009 10198

  102. How To kEEp The sector is not looking good. A gRip on THE Even the most optimistic out there believe that the real estate slump will only start to improve slippERy slopE towards the end of 2010. Uncertainty has given way to overall confusion, and nobody sixTH CB RiCHARd Ellis is quite sure how, where and REAl EsTATE BARoMETER when we will finally come out of this crisis period. Reputable information and a asset purchasing strategy and discerning attitude are more corporate disinvestment through crucial than ever before. There sale and leaseback operations. is no longer any certainty, and a Nick Axford, CB Richard Ellis general market consensus is now Director of Research for EMEA nothing more than an illusion. As (Europe, Middle East and with anything else, there are ways Africa), suggests that activity to ensure that you keep a foothold should be focused on real and not slide down the slippery estate markets which offer the slope. CB Richard Ellis has asked most strategic and structural a wide range of its clients for their interest, or where value has been opinions on this issue in 2008, identified among highly similar and the unanimous response was products. Should any doubt that the crisis is a severe one, but arise, it is always best to opt for that among so many dark clouds prime products and markets there are one or two silver linings. with a strong and consolidated During a recent seminar on range. If these criteria are capital markets, CB Richard Ellis followed, Axford believes that Executive Managing Director, there are opportunities to win in Adolfo Ramírez-Escudero, the medium term. recommended global integration, encouraging third-party service THE fuTuRE in 600 models and commitment to opinions sustainability as long-term The various seminars organised value elements. In his opinion, each year by CB Richard Ellis the market will focus on the bring together a large number intersection between a core of senior directors from the 102 BARoMETER Despite the crisis, there are ways of staying on your feet and not failing

  103. Spanish real estate sector. In professionals actually feel. This as is the striking of the perfect 2009 the seminars celebrated is precisely why we have used balance between real estate their fifth anniversary, and over them to broaden the scope of tasks as a managing partner and these years they have become the CB Richard Ellis barometer, as an operational partner. To the main forum for analysis a classic real estate opinion poll do so risk management must and reflection on the sector in now in its sixth year. be focused on each individual Spain. Eight of these seminars The barometer also includes asset, applying a specific were held in 2008, attended by some of the arguments put business plan for each case. The over 600 senior figures from forward by the speakers in the third piece of advice given by companies, funds, business and capital markets seminar, held on José Antonio León was to take estate agents. 25 th November 2008, which act a leading role in the sustainable Last year seminars were held on as a full analytical explanation of development field, which in the investment, logistics and retail the figures presented. in Madrid, with other events on international investment held CAuTion And quAliTy in Barcelona, Málaga, Valencia, José Antonio León, Managing Zaragoza and Palma de Mallorca. Director of Hines Spain, All included round tables where participated in the capital the participants answered a markets conference, citing range of questions on the future quality as the best way to move of the real estate sector, via an forward in times of crisis. anonymous and personal tele- According to León quality voting system. construction and management, Due to the scope and understood as the quality representative nature of the legacy for symbolic buildings, sample, the results obtained from are always a sure bet in the this survey are the best yardstick real estate world. This is one of how Spanish real estate of Hines corporate principles, quAliTy ConsTRuCTion And MAnAgEMEnT, THE foundATions of wHiCH ARE found in signATuRE Buildings, will AlwAys BE A sECuRE CHoiCE in REAl EsTATE Despite the crisis, there are ways of staying on your feet and not failing Trends 2009 103

  104. How To kEEp A gRip on THE slippERy slopE sixTH CB RiCHARd Ellis REAl EsTATE BARoMETER In mid-2008, how long do you forecast that the real estate turmoil gEnERAl will last in Spain? 1-2 years 20 2-3 years 49.5 future will be the cornerstone of efficiency that will assure that over 3 years 30.5 any new project is successful. THE EyE of THE sToRM Others who participated in the seminar were: Juan Barba, Director General of Real Estate What will be your short-term cross-border strategy? at Doughty Hanson; Herman Montenegro, Managing Director of mainly as a purChaser 15.5 Axa Reim Spain; Luis Basagoiti, President of Mapfre Inmuebles, very seleCtive purChasing 48 and Luis Puchol-Plaza, Managing highly limited aCtivity 19.5 Director of Goldman Sachs Spain. They pointed out that in a very seleCtive selling 4 situation as volatile as the one we mainly selling 13 are currently experiencing, initial yields are of little use. When buyers and sellers conceptions of value are so different, confiding in yields could be debatable because of the difficulties of applying Where will you focus your search for development and/or yields, refurbishments or possible investment opportunities? future reductions in rents. Buyers continue to focus on Western europe 8.5 prices in the first half of 2007 Central and eastern europe 31.5 and this in turn is creating a latin ameriCa 36 psychological barrier to accepting the inevitable decrease in prices. usa 20 In conclusion, they advised asia 4 adapting to the new market THE MARkET is in A sTATE of sHoCk, And pEoplE ConTinuE To wAiT foR BAd nEws, wHiCH MAkEs iT EvEn MoRE iMpoRTAnT To REACT 104 BARoMETER 37% are of the opinion that the most attractive properties to invest in abroad are offices

  105. What kind of assets are most attractive to you when it comes to investing abroad? retail 8 offiCes 37 residential 34.5 hotels 8.5 logistiCs 12 climate and above all correcting levels of liquidity. Everyone is in agreement that the market is in a state of shock, and things are not happening because people continue to wait for bad What is the main motivation when it comes to investing abroad? news, which makes it even more important to react as soon as higher profitability 26.5 possible. produCt availability 3 In conclusion, they believe that the market uncertainty has portfolio diversifiCation 36 generated some good news (risk all the above 34.5 is beginning to abate, there will never be a repeat of economic interests being so out of line with caution, as has been seen over the past few years) as well as one more piece of bad news: the recession has taken What concerns you most when it comes to investing abroad? hold in the United States and as one would expect, it will be CurrenCy risk 3 somewhat delayed in reaching taxation 9 Europe and that both areas will see the recession continue Coordination of asset management 11 for between 18-24 months at laCk of market knoWledge 38.6 the very least. There does not appear to be a magic formula of legal risks 38.4 how to escape this or how long this will take, which means that one has to focus even harder on determining which sectors could begin to come out of the recession first. The group noted that the crisis will continue for between two to three years and will be felt more 37% are of the opinion that the most attractive properties to invest in abroad are offices Trends 2009 105

  106. How To kEEp A gRip on THE slippERy slopE sixTH CB RiCHARd Ellis REAl EsTATE BARoMETER in some sectors than others. What do you think is the best way to start They indicated that the Spanish cross-border investment? office market is subject to fluctuations which will prolong indireCtly (via funds) 13 the uncertainty and that it will listed Company 2 48 take some time to stabilise. The situation is aggravated by the loCal partner 42 fact that the real estate sector is partner in the Country of origin 32 at the end of the food chain in terms of the crisis, far behind solitary direCt investment 11 industrial and financial turmoil, which could make the drop in real estate activity even more pronounced in 2009, with a slow recovery beginning in the following year. In which Latin American country are you positioned They also pointed out that or do you plan to position yourself within the next five years? there will continue to be a lack of financial activity over mexiCo 69 the coming months. That Costa riCa 8 48 financing will be limited to small transactions, where the brazil 15 seller needs to make money and Cuba 8 where the price will help to MÉxiCo is THE lATin AMERiCAn CounTRy wHERE 69% of THosE pollEd and 2011. A further 30 consider ExpECT To MovE in To that the improvement will only become noticeable in the second finance the transaction, such as half of 2011. very structured sale & leaseback The almost unanimous transactions, carried out not agreement on the severity of the only to optimise space, but also domestic crisis also explains the to gain capital and restructuring interest in expanding abroad. existing credit lines. One of every two directors is planning on highly selective inTEREsT in cross border purchasing policies THE foREign sECToR in the future, most of which are According to the votes cast in focused on Latin American and the remaining seminars, half of Central and Eastern Europe. all Spanish professionals within One in every five is also taking the sector feel that the real estate a shine to the American market. crisis will start to die down at Office buildings and the some point between June 2010 residential sector continue to be 106 BARoMETER Offices and the residential sector continue to be the most interesting foreign property areas

  107. What do you think are the most attractive assets the foreign assets which hold for investment on the American continent? the most interest, with a certain awakening from logistics and hotels 23 a reticence to invest in hotels residential: main home 23 representing the main novelties in this regard. residential: holiday home 38 Portfolio diversification offiCes 8 continues to be the main argument for expanding abroad, industrial 8 and lack of market knowledge and legal risk continue to be the primary obstacles to making that final decision. 42% of Spanish directors believe that the best way round this problem is to side with a partner in the target country, whereas 32% prefer to stick to a Spanish partner. Mexico is the preferred destination for medium-term real estate investment, followed some distance behind by Brazil. With regard to asset types, 38% of those surveyed opted for holiday homes, 23% for hotels and a further 23% for investment in main homes, an interesting piece of news that will increase the range of investment products on offer. Offices and the residential sector continue to be the most interesting foreign property areas Trends 2009 107

  108. How To kEEp A gRip on THE slippERy slopE sixTH CB RiCHARd Ellis REAl EsTATE BARoMETER As the epicentre of the European Union moves towards the East, logisTiC does the Spanish logistics sector run the risk of being left to one side? no Way 19 not likely 40 probably 35 definitely 6 How do you see your requirements with regard to logistics premises developing in the next 18 months? they Will substantially inCrease 17 they Will inCrease slightly 36 48 they Will not Change 17 they Will deCrease slightly 21 they Will substantially deCrease 9 To meet your needs in terms of industrial properties, which of the following is the best options? rental 26 rental of turnkey produCts 49 purChase 8 purChase With an eye to future rental or 17 sale and leasebaCk Rising logisTiCs the European Unions move El 38,06% piEnsA quE lAs dEMAnd towards the East will increase REnTABilidAdEs sE The logistics company directors competition for logistics who attended CB Richard in Spain. MAnTEndRÁn EsTABlEs Ellis logistics seminar, held This increased competition in Madrid in February 2008, does not mean a lack of interest, were clear on one fact: that with 51% of those surveyed 108 BARoMETER The exodus eastwards will compete with Spanish logistics locations

  109. The profitability of logistics platforms is currently 6.25%. How do you think this will change? it Will inCrease quiCkly 17 it Will inCrease gradually 30 it Will remain the same 25 it Will fall gradually 13 it Will fall quiCkly 15 THREE ouT of EvERy fouR will opT To REnT logisTiCs What is your opinion of medium-sized industrial properties spACE, And onE in EvERy with approximately 1,000 sqm for rent? Two will CHoosE To CARRy 36 ouT TuRn-kEy pRojECTs not very interesting 30 interesting 8 interesting, but it depends on the loCation 27 claiming that their logistics very interesting 8 needs will rise until mid- 2009. Three of every four very interesting if Close to areas 27 of high population will opt for logistics rentals, whereas 50% will rent turnkey products. Not only that, but half of all directors believe that logistics profitability will have increased by that date. Given the high prices of industrial premises close to cities and The key to success within the considering transport costs, is it worth looking for a location that is sector in the upcoming months further away if that means paying lower rent? will be location. Seven of every 54 ten directors consider it of yes interest to acquire industrial yes, if the distribution units of up to 1,000 metres Warehouses are Closer 25 squared, but almost all believe to the end market that this decision should only no 21 be taken if a suitable location close to an urban nucleus is available. Nevertheless, half feel that it would be worth moving to areas further away if this led to significant savings in rental costs. The exodus eastwards will compete with Spanish logistics locations Trends 2009 109

  110. How To kEEp A gRip on THE slippERy slopE sixTH CB RiCHARd Ellis REAl EsTATE BARoMETER Compared to the rest of Europe, RETAil what is the current situation of the retail market in Spain? muCh better 3 RETA il oppoRTuniTiEs slightly better 22 48 Retail expectations have also faded, but less so than in other the same 32 sectors. Directors believe slightly Worse 40 that the current situation in which this sector finds itself is muCh Worse 3 slightly worse than before, but the majority considers that it is still sufficiently attractive to ensure that new international operators enter the market, and Is the Spanish retail market an attractive opportunity that there are still some busi- for new foreign retailers? ness opportunities out there. Over half of these directors feel highly attraCtive 29 that shopping centres will fare someWhat attraCtive 5348 the current store of declining consumption better than high not very attraCtive 18 street stores, and 40% consider not attraCtive at all 0 that the fashion sector will lead the market. Are there any new opportunities for shopping centre development in Spain? there are lots 7 of opportunities there are 61 some opportunities there are feW 25 opportunities there are hardly 7 any opportunities 110 BARoMETER Four out of ten believe that the fashion sector will be the most active sector

  111. MoRE THAn HAlf ExpECT THAT sHopping CEnTREs will wiTHsTAnd THE CuRREnT MARkET BETTER THAn gEnERAl sTREET uniTs 53 High-street stores will fare better than shopping centres during the drop in consumption: agree or disagree? strongly agree 12 agree to a Certain extent 12 neither agree nor disagree 25 disagree to a Certain extent 31 strongly disagree 20 In which commercial sectors are there more opportunities for retailer expansion? food and drink 9 fashion 41 sports 20 home 8 leisure 22 Four out of ten believe that the fashion sector will be the most active sector Trends 2009 111

  112. CB RiChaRd Ellis s.a. intERnational nEtwoRk of offiCEs MoRE than 400 offiCEs in 60 CountRiEs aRGEntina BulGaRia finland Buenos Aires Sofía Helsinki (Espoo) austRalia Canada fRanCE Adelaide Calgary Aix en Provence Braddon Edmonton Angers Brisbane Halifax Annecy Cairns Kitchener Aubière Canberra London Avignon Chermside Montreal Bordeaux Gold Coast (2) Ottawa Caen Ipswich Saint John Chambery Melbourne Toronto (5) Strasbourg Milton Vancouver Grenoble Mulgrave Windsor Le Havre Parramatta Winnipeg Le Mans-Laval Perth Lille Sunshine Coast ChilE Lyon Sydney (3) Santiago de Chile Marseille Townsville Metz Tweed Heads China Montlucon Underwood Beijing Montpellier Chengdu Montreuil austRia Guangzhou Montrouge Vienna Hong Kong Mulhouse Shanghai (2) Nancy BahRÉin Nantes Manama CRoatia Neuilly-sur-Seine Zagreb Nice BElGiuM Orleans Brussels CzECh Paris (5) REPuBliC Rennes Bostwanna Prague Roven Gabarone Saint Dennis dEnMaRk Saint-Nazaire BRazil Aarhus Sophia Antìpolis Rio de Janeiro Copenhaguen Toulouse Sao Paulo (2) Kolding 112

  113. GERMany Sapporo PoRtuGal tuRkEy Berlin Sendai Lisbon Istanbul Frankfurt Shinjuku Oporto Hamburg Shizuoka ukRainE Munich Tachikawa RoMania Kiev Takamatsu Bucharest GREECE Tokyo uGanda Athens Yokohama Russia Kampala Thessalonica Moscow kazakhstan unitEd aRaB holland Almaty sERBia EMiRatEs Amsterdam Belgrade Abu Dhabi Hoofddorp kEnya Dubai (2) The Hague Nairobi sinGaPoRE Singapore unitEd hunGaRy koREa kinGdoM Budapest Seoul sloVakia Belfast Bratislava Birmingham india luxEMBouRG Bristol Bangalore City of Luxembourg south Edinburgh Chennai afRiCa Glasgow Hyderabad MExiCo Bloemfontein Jersey Bombay Mexico City Cape Town Leeds Nueva Delhi Monterrey Durban (2) Liverpool Pune Queretaro Johannesburg (2) London (3) Klerksdorp Manchester indonEsia MontEnEGRo Nelspruit Southampton Jakarta Budva Polokwane Port Elizabeth unitEd iREland MoRoCCo Pretoria statEs Dublin Casablanca Offices (166) sPain isRaEl nEw Barcelona VEnEzuEla Tel-Aviv zEaland Madrid Caracas Auckland Málaga italy Christchurch Marbella ViEtnaM Milan South Auckland Palma de Mallorca Ha Noi Rome Valencia Ho Chi Minh (2) Turin noRway Zaragoza Oslo ziMBaBwE JaPan swEdEn Bulawayo Chiba PanaMÁ Stockholm Harare Fukuoka Panama City Gothenburg Hiroshima Ikoma PERu switzERland Kagoshima Lima Geneva Kanazawa Zurich Kobe PhiliPPinEs Kyoto Manila taiwan Matsuyama Taipei Nagoya Poland Niigata Cracow thailand Okayama Poznan Bangkok (2) Omiya Warsaw Phuket Osaka Tendencias 2009 113

  114. This publication has been carefully prepared for the purpose of providing general information and no responsibility is assumed for any errors or omissions. The opinions and data included herein refer to the month of December 2008 and are subject to change without prior notice. Any transaction that is made in the market should not be based solely or necessarily on the data contained in this publication. Nor may they be published whether in whole or in part nor be cited as a source without prior written authorisation from CB Richard Ellis. Design and production: BPMO Edigrup

  116. Real State Report 2009 www.cbre.es

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