Upload
burt
View
47
Download
0
Tags:
Embed Size (px)
DESCRIPTION
The economy and property markets in 2014. OAS breakfast, November 28 th 2013. Global economy is improving (mostly). USA Banks are lending Consumers have stopped precautionary saving Austerity programme less damaging than UK Medium term energy self-sufficiency? Labour cheap BRICS - PowerPoint PPT Presentation
Citation preview
savills.com
The economy and property markets in 2014OAS breakfast, November 28th 2013
Global economy is improving (mostly) USA
Banks are lending Consumers have stopped precautionary saving Austerity programme less damaging than UK Medium term energy self-sufficiency? Labour cheap
BRICS Was slowing growth inevitable? China – not that much wrong Russia – virtually everything wrong (transparency, governance, oil price, law, corruption) Brazil – tight fiscal policy, how much has recent growth been due to US QE, needs
more reform India – most worrying, needs lots of reforms, tough to do business in
Global economy is improving (mostly) Japan
New economic policy holds out some hope for growth But new consumption tax could cancel out the benefits of QE
Eurozone Little hope of growth as a region Continued widening between core and fringe
Big theme Interest rates, tapering, QE and what
happens if the economies haven’t reached escape velocity when central banks act
EUROZONE GDP(indices; 2007 Q1 = 100)
2007 2009 2011 201390
95
100
105Eurozone North*
Eurozone South**
* Germany, Benelux, Austria, Finland. ** Italy, Spain, Greece, Portugal.
UNITED STATES GDP(indices; 2007 Q1 = 100)
2007 2009 2011 201390
95
100
105
USA North East *
USA South East**
* ME, NH, VT, MA, CT, RI, NY, NJ, PA, DE. ** SC, AR, AL, TN, GA, MS, LA, FL.
Until June I could have recycled this slide for the third year....
... But something happened to Britain this summer
Source: GfK,
Jan-0
0
Sep-00
May-01
Jan-0
2
Sep-02
May-03
Jan-0
4
Sep-04
May-05
Jan-0
6
Sep-06
May-07
Jan-0
8
Sep-08
May-09
Jan-1
0
Sep-10
May-11
Jan-1
2
Sep-12
May-13
-50
-40
-30
-20
-10
0
10
UK
Con
sum
er C
onfid
ence
Inde
x
House price growth undoubtedly had something to do with this
Q4 80 Q2 83 Q4 85 Q2 88 Q4 90 Q2 93 Q4 95 Q2 98 Q4 00 Q2 03 Q4 05 Q2 08 Q4 10 Q2 13-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
Annual House Price Growth Affordability
Ann
ual H
ouse
Pric
e G
row
th
Surp
lus
Net
Inco
me
afte
r Hou
se P
urch
ase
Source: Savills, Nationwide
Are the chattering classes impacting on sentiment?
Source: Savills
Total real growth over period
UK PCL Difference
82 - 93 20.4% 29.5% 9.1%
93 - 05 122.7% 145.2% 22.5%
Since 05 -19.3% 65.9% 85.2%
Is this worrying or exciting?
Oct-05
Feb-0
6
Jun-0
6
Oct-06
Feb-0
7
Jun-0
7
Oct-07
Feb-0
8
Jun-0
8
Oct-08
Feb-0
9
Jun-0
9
Oct-09
Feb-1
0
Jun-1
0
Oct-10
Feb-1
1
Jun-1
1
Oct-11
Feb-12
Jun-1
2
Oct-12
Feb-1
3
Jun-1
3
Oct-13
-70-60-50-40-30-20-10
010203040506070
New Instructions New Buyer Enquiries
Source: RICS
The housing recovery becomes more national from 2014
Assuming no further changes in the taxation of high value property
2014 2015 2016 2017 20185 years to end2018
Prime London
4.5% -0.5% 7.0% 5.5% 4.5%
22.7%
Prime Regional
4.5% 1.0% 5.0% 5.5% 5.0%
22.7%
Source: Savills Research
But the UK recovery isn’t just about housing
Source: Markit/CIPS
Jan 0
5
Jun 0
5
Nov 05
Apr 06
Sep 06
Feb 07
Jul 0
7
Dec 07
May 08
Oct 08
Mar 09
Aug 09
Jan 1
0
Jun 1
0
Nov 10
Apr 11
Sep 11
Feb 12
Jul 1
2
Dec 12
May 13
Oct 13
30
35
40
45
50
55
60
65
70
Services Manufacturing
% B
alan
ce
People are less worried about losing their jobs
0
10
20
30
40
50
60
70
80
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
UK: Gfk/NOP consumer confidence - unemployment expectations% balance
Source : Haver Analytics
And consequently are saving less
Q1 2010
Q2 Q3 Q4 Q1 2011
Q2 Q3 Q4 Q1 2012
Q2 Q3 Q4 Q1 2013
Q24.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
Sav
ing
ratio
%
Source: ONS
But earnings growth is still weak
Jan 0
1
Nov 01
Sep 02
Jul 0
3
May 04
Mar 05
Jan 0
6
Nov 06
Sep 07
Jul 0
8
May 09
Mar 10
Jan 1
1
Nov 11
Sep 12
Jul 1
3-4
-2
0
2
4
6
8
10
Private sectorPublic sector
Ave
rage
ear
ning
s (in
cl b
onus
) %pa
Companies are also planning on spending
-40
-30
-20
-10
0
10
20
30
40
1996 1998 2000 2002 2004 2006 2008 2010 2012Source: BCC
% balanceUK: Investment intentions
Service sector
Manufacturing sector
So, the outlook is for faster and more balanced growth
-2
-1
0
1
2
3
4
1997-2007
2012 2013 2014 2015 2016 2017
Consumer spending InvestmentGovt. consumption InventoriesNet trade
UK: Contributions to GDP growth%pts
Source : Oxford Economics
What could go wrong?
Political risk USA
Debt ceiling reached again (Mar/June 2014) End of QE
Europe Default hasn’t gone away What happens when Greece doesn’t need the EU’s money?
UK The real housing crisis?
Households take on more debt to fund house moves Higher housing activity drives up consumer spending and GDP Unemployment goes below 7% faster than expected Inflation rises and then rates rises More debt and earlier rate rises lead to financial stress?
Vote winners – mansion tax etc
What does this mean for office markets in the UK?
Rising leasing volumes everywhere
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
5
10
15
20
25
30
35M25 Regional cities (top 7) Central London
Avg: 4.6m sq ft 4.0m sq ft 9.5m sq ft
Source: Savills
And a return to a normal split between London and the regions
2000
2002
2004
2006
2008
2010
2012
2014
2015
0
5,000
10,000
15,000
20,000
25,000
30,000
Rest of UKLondon£m
Source: Savills
Regional spread is still interesting (as is prime/secondary)
Source: Savills
01/9
1
01/9
2
01/9
3
01/9
4
01/9
5
01/9
6
01/9
7
01/9
8
01/9
9
01/0
0
01/0
1
01/0
2
01/0
3
01/0
4
01/0
5
01/0
6
01/0
7
01/0
8
01/0
9
01/1
0
01/1
1
01/1
2
01/1
3
3%
4%
5%
6%
7%
8%
9%
10%
0
50
100
150
200
250
300
350
400
WE/Reg spread bps West End (Avg 5.07%) Regional (Avg 6.47%)
Yie
ld %
Spr
ead
bps
savills.com
Three key themes for UK offices over the next five years
Theme 1 – The return of the empowered employee Employment is at a record high
Significant questions around immigration
Employers have got used to not raising salaries – can they compensate with workplaces?
Employees (especially graduates) might start having a choice of employer again
... Once again the workplace will be a tool to attract and retain talent
What is important to employees?
Comfort of work areaTemperature
LightingLength of commute to
work General noise levelsSpace
Kitchen Smell
SecurityQuality of wireless technology Public transport connectionsCar parking Internal fit out
(bespoke)Availability of meeting rooms Proximity to shops Break out areaEnvironmental/
green policies of the company (e.g.
recycling) Variety of local re-tail/ leisure offering Proximity to green
space/ parks View from the workplace Canteen/ café
ColourGreen space / roof terrace Office art/
greeneryEnvironmental per-formance (“Green” rating) of the build-
ing Showers/ changing
facilitiesAbility to work
from a variety of locations within the
building Proximity to
leisure facilities Bicycle storage Clustering of simi-lar businesses in local area/ net-
working opportuni-ties
Gym Social area/ bar External building
design (newly built)Crèche Smoking area Games room Prayer room
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Source: Savills, YouGov
What is important to employees in London?
Comfort of work areaLength of
commute to work TemperaturePublic transport
connectionsGeneral noise levelsLighting
SpaceKitchen Security
SmellQuality of wireless technology Proximity to shops Internal design/ fit
out Availability of meeting rooms Variety of local re-
tail/ leisure offering Proximity to green space/ parks Break out area/
quiet room Environmental/
green policies of the company (e.g.
recycling) Proximity to
leisure facilities ColourOffice art/ greeneryView from the
workplace Showers/ changing facilities
Canteen/ café Environmental per-formance (“Green” rating) of the build-
ing
Green space / garden/ roof ter-
race Bicycle storage Clustering of simi-lar businesses in local area/ net-
working opportuni-ties
Ability to work from a variety of
locations within the building Car parking External building
design Gym Social area/ bar
Crèche Smoking area Games room Prayer room
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Source: Savills, YouGov
The return of the empowered employee:Implications for the market SME demand, unwilling self-employed and part-timers
In-movers to CBD’s e.g. Telefonica, Amazon, Jacobs
The return of the softer factors – social, place, environment
Transport hubs: travel costs, housing costs, rising fuel prices
The workplace as home space?
Theme 2 – Austerity
Public sector cuts will continue to bite nationally
Retail is still dealing with structural change
Some occupiers will want to be seen as austere, others will have no choice
Implications: Stronger demand for the fringe than the core Some businesses will drift out-of-town for great buildings Rise of blingteria
Theme 3 – TMT, tMT, mobile, big data, bricks versus clicks, gamification, social media
Technological changeImplications for the market
Generally over-forecast, occasionally under forecast
Not a bubble, a fact of life
Workplaces and outside spaces shouldn’t be a barrier to adoption
Tenant demands are no more homogenous than Professions or Finance
Creatives create the buzz that others aspire to
Final thoughts The recovery is underway and there are even some upside scenarios
The “new normal” isn’t as new as many would like you to believe
The next decade in offices will again be about people and places
Watch out for: Electioneering politicians Rising rates Sustainability shocks