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MIPIM: 9-12 March 2004

MIPIM: 9-12 March 2004. Angus McIntosh Partner & Head of Research. The Golden Age of Property Investment: Debt, Deflation and the Dragon. The Global Golden Age of Property Investment. Property: an investment asset The Global Economy Government Debt Global Property Markets

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MIPIM: 9-12 March 2004

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  1. MIPIM: 9-12 March 2004 Angus McIntosh Partner & Head of Research

  2. The Golden Age of Property Investment:Debt, Deflation and the Dragon

  3. The Global Golden Age of Property Investment • Property: an investment asset • The Global Economy • Government Debt • Global Property Markets • International Property Investment

  4. The Global Golden Age of Property Investment • Property: an investment asset

  5. Annualised Rates of Return for UK equities, UK Bonds and Property 1971-2003 Source: IPD and King Sturge

  6. Correlation Between Returns, 1971-2003, UK NB: 2003 figure for property is an estimate using the IPD Monthly Index Source: IPD and King Sturge

  7. UK Portfolio Investment Returns 1971 - 2003 ----- Portfolio Weighting ----- Source: IPD and King Sturge

  8. International: GDP & Property Investment (Correlations over 5 years to 2002/3) • UK 55% • France 43% • Ireland 72% • Netherlands 79% • Sweden 86% • Germany 5% Source: IPD and King Sturge

  9. The Global Golden Age of Property Investment • Property: an investment asset • The Global Economy

  10. The Story of …… the Global Trinity

  11. The Story of …… the Global Trinity Son USA

  12. The Story of …… the Global Trinity Son Father USA Europe

  13. The Story of …… the Global Trinity Son Father Global Ghost USA Europe Asia

  14. Global Economic Outlook Source: Oxford Economic Forecasting (Winter 2003/04)

  15. Global Economic Outlook Source: Oxford Economic Forecasting (Winter 2003/04)

  16. Output Growth of the G7 Source: Oxford Economic Forecasting (Winter 2003/04)

  17. Unemployment within the G7 Source: OECD (mid 2003)

  18. Economic Hot Sectors for 2004 • Electrical engineering - computer • Construction • Retailing • Transport • Communications – telecoms • Business Services • Health & Education • The Dot.Com / TMT economy is back – but…

  19. What does this mean ? • A jobless recovery – but we already have very low unemployment in some countries • Productivity driven - using up surplus capacity – especially IT • Weak demand for property but Government and “Civic Society” a major player • Polarisation of demand - quality of locations and building important – the human impact

  20. The Global Golden Age of Property Investment • Property: an investment asset • The Global Economy • Government Debt

  21. Government Debt

  22. Euro Zone - financial balance % of GDP – Maastricht = - 3% NB: Maastrict Stability & Growth Pact = 3% Source: Oxford Economic Forecasting (Q4 2003)

  23. Government Debt – the Iceberg • Explicit • Government Bonds • Implicit • Pensions & Health liabilities • Global Warming – flooding • Security - terrorism

  24. Government debt – the iceberg (Explicit and Implicit debt % GDP @ 2003) Source: P. Heller. IMF Estimates 2003

  25. Paying off debt • Reduce future liabilities – part by privatisation • Inflation • Fall in value of currency • Rising Productivity, from education and IT • Migration and more children • … or fiscal crunch, Governments go bust, like California ... and then……………….. ?

  26. Arnie takes over - The Governator Arnold Schwarzenegger The Governor of California in The Terminator

  27. The Global Golden Age of Property Investment • Property: an investment asset • The Global Economy • Government Debt • Global Property Markets

  28. The Story of …… the Global Trinity Son Father Global Ghost USA Europe Asia

  29. The Global Trinity USA – the Son • Jobless recovery • Worry of debt • Population growth • Productivity – IT and Corporate Consolidation • No longer THE engine of global growth – but still very important

  30. World Prime Office Rental Growth: Year End Source: King Sturge / Various Agents

  31. US Office Rental Growth in US$ ft² pa Source: King Sturge and various agents

  32. US Industrial Rental Growth in US$ ft² pa Source: King Sturge and various agents

  33. The Global TrinityEurope – the “old” Father • Slow to change – More Corporate and Location Consolidation • Growth of Service Sector • Downsize of Government • Central Europe to supply cheap labour • Two speed economy – Celtic & Scandic fringe in the fast lane

  34. European City Office Take-Up ft² millions Source : Various Agents, February 2004

  35. European Prime Office Rental Growth: Year End Source: King Sturge / Various Agents

  36. European Prime Office Rental Growth: Year End Source: King Sturge / Various Agents

  37. European Prime Office Rental Growth: Year End Source: King Sturge / Various Agents

  38. European Prime Industrial Rental Growth: Year End Source: King Sturge

  39. European Prime Industrial Rental Growth: Year End Source: King Sturge

  40. The Global TrinityAsia – the Global Ghost • China & India – engines of global growth • China – More Global Manufacturing • More Global Logistics – distribution • India – More English Call Centres and Accountants

  41. Asia Prime Office Rental Growth: Year End Source: King Sturge / Various Agents

  42. Asia Prime Office Rental Growth: Year End Source: King Sturge / Various Agents

  43. Asia Prime Industrial Rental Growth: Year End Source: King Sturge

  44. Asia Prime Industrial Rental Growth: Year End Source: King Sturge

  45. The Global Golden Age of Property Investment • Property: an investment asset • The Global Economy • Government Debt • Global Property Markets • International Property Investment

  46. International Property Investment

  47. UK Investment Market Returns Source: IPD Monthly Index (December 2003) / FT

  48. USA – S&P 500 Stock Market

  49. UK investment outlook 1990-2004 Forecast Equity yield (31/12/03) = 4.78 Source: IPD, Real Estate Forecasting, Oxford Economic Forecasting

  50. International Yields & Interest Rates %

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