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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

MIPIM: 9-12 March 2004

Angus McIntosh

Partner & Head of Research

the global golden age of property investment
The Global Golden Age of Property Investment
  • Property: an investment asset
  • The Global Economy
  • Government Debt
  • Global Property Markets
  • International Property Investment
annualised rates of return for uk equities uk bonds and property 1971 200 3
Annualised Rates of Return for UK equities, UK Bonds and Property 1971-2003

Source: IPD and King Sturge

correlation between returns 1971 200 3 uk
Correlation Between Returns, 1971-2003, UK

NB: 2003 figure for property is an estimate using the IPD Monthly Index

Source: IPD and King Sturge

uk portfolio investment returns 1971 200 3
UK Portfolio Investment Returns 1971 - 2003

----- Portfolio Weighting -----

Source: IPD and King Sturge

international gdp property investment correlations over 5 years to 2002 3
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

the global golden age of property investment2
The Global Golden Age of Property Investment
  • Property: an investment asset
  • The Global Economy
the story of the global trinity3
The Story of …… the Global Trinity

Son

Father

Global Ghost

USA

Europe

Asia

global economic outlook
Global Economic Outlook

Source: Oxford Economic Forecasting (Winter 2003/04)

global economic outlook1
Global Economic Outlook

Source: Oxford Economic Forecasting (Winter 2003/04)

output growth of the g7
Output Growth of the G7

Source: Oxford Economic Forecasting (Winter 2003/04)

unemployment within the g7
Unemployment within the G7

Source: OECD (mid 2003)

economic hot sectors for 2004
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…
what does this mean
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
the global golden age of property investment3
The Global Golden Age of Property Investment
  • Property: an investment asset
  • The Global Economy
  • Government Debt
euro zone financial balance of gdp maastricht 3
Euro Zone - financial balance % of GDP – Maastricht = - 3%

NB: Maastrict Stability & Growth Pact = 3%

Source: Oxford Economic Forecasting (Q4 2003)

government debt the iceberg
Government Debt – the Iceberg
  • Explicit
  • Government Bonds
  • Implicit
  • Pensions & Health liabilities
  • Global Warming – flooding
  • Security - terrorism
government debt the iceberg explicit and implicit debt gdp @ 2003
Government debt – the iceberg (Explicit and Implicit debt % GDP @ 2003)

Source: P. Heller. IMF Estimates 2003

paying off debt
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……………….. ?
arnie takes over the governator
Arnie takes over - The Governator

Arnold Schwarzenegger

The Governor of California in The Terminator

the global golden age of property investment4
The Global Golden Age of Property Investment
  • Property: an investment asset
  • The Global Economy
  • Government Debt
  • Global Property Markets
the story of the global trinity4
The Story of …… the Global Trinity

Son

Father

Global Ghost

USA

Europe

Asia

the global trinity usa the son
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
world prime office rental growth year end
World Prime Office Rental Growth: Year End

Source: King Sturge / Various Agents

us office rental growth in us ft pa
US Office Rental Growth in US$ ft² pa

Source: King Sturge and various agents

us industrial rental growth in us ft pa
US Industrial Rental Growth in US$ ft² pa

Source: King Sturge and various agents

the global trinity europe the old father
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
slide34

European City Office Take-Up

ft² millions

Source : Various Agents, February 2004

european prime office rental growth year en d
European Prime Office Rental Growth: Year End

Source: King Sturge / Various Agents

european prime office rental growth year end
European Prime Office Rental Growth: Year End

Source: King Sturge / Various Agents

european prime office rental growth year end1
European Prime Office Rental Growth: Year End

Source: King Sturge / Various Agents

the global trinity asia the global ghost
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
asia prime office rental growth year end
Asia Prime Office Rental Growth: Year End

Source: King Sturge / Various Agents

asia prime office rental growth year end1
Asia Prime Office Rental Growth: Year End

Source: King Sturge / Various Agents

the global golden age of property investment5
The Global Golden Age of Property Investment
  • Property: an investment asset
  • The Global Economy
  • Government Debt
  • Global Property Markets
  • International Property Investment
slide47

UK Investment Market Returns

Source: IPD Monthly Index (December 2003) / FT

slide49

UK investment outlook 1990-2004

Forecast

Equity yield

(31/12/03) = 4.78

Source: IPD, Real Estate Forecasting, Oxford Economic Forecasting

slide51

UK Historic Property, Equity Dividend & Long Gilt Yields

1975.

North Sea Oil

1992

Sterling leaves ERM

1973

Oil Crisis

1961

UK failure to join EEC

1974 Miners Strike

Source: UBS Global Research, Property Masters, IPD and King Sturge

the global golden age of property investment6
The Global Golden Age of Property Investment
  • Property: an investment asset
  • The Global Economy
  • Government Debt
  • Global Property Markets
  • International Property Investment
mipim 9 12 march 20041

MIPIM: 9-12 March 2004

Angus McIntosh

Partner & Head of Research