LaSalle's Macro Indicators - November 2014 · 02-12-2014 · Macro Outlook: Low-Low-Low = High ....
Transcript of LaSalle's Macro Indicators - November 2014 · 02-12-2014 · Macro Outlook: Low-Low-Low = High ....
Macro Outlook: Low-Low-Low = High The Universe DTU Surprises
Toronto Forum
December 2, 2014
Deflation
LaSalle Investment Management | LaSalle’s Macro Indicators | 2
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Com
pone
nts
of W
orld
GD
P G
row
th
Middle East & North Africa Latin America Rest of the World CEEAsia-Pacific ex-Japan North America Western Europe Japan
2.9% 2.4%
2.4%
3.5%
-1.6%
2.1%
4.4%
3.1% 2.6%
3.2%
Global growth to pick up in 2015 Developed markets will contribute more after disappointing 2014
Emerging Markets
Forecast
Developed Markets
Source: Oxford Economics Forecasts as of 20 November 2014
2015 GDP Forecasts Upgrades in Korea and UK, Downgrades in China, Japan, and Europe
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
China SouthKorea
Australia UK Mexico Canada Germany US Japan France
Dec. 2013 Forecast Nov. 2014 Forecast
2015 GDP Growth Forecasts: Nov. 2014 vs. Dec. 2013
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-2
-1
0
1
2
3
4
5
6
7
Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14
CPI
Infla
tion
% y
/y
Eurozone UKUS JapanChina
Source: Eurostat , Bloomberg, Oxford Economics Latest data as of 31 October 2014
Disinflation in Eurozone, Approaching Deflation Eurozone Headline Inflation was 0.4% y/y in October
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*Source: Bloomberg , Oxford Economics Latest as of 31 October 2014
Inflation Expectations Down in Q4 China’s Inflation Rate Slows to 1.6% in October
7.5
6.5
3.9
2.7
2.4
2.1
2.0
2.0
1.8
1.5
1.2
1.2
0.9
0.7
0.3
0.1
0.0 2.0 4.0 6.0 8.0
India
Brazil
Mexico
Australia
China
Japan
Canada
South Korea
United States
United Kingdom
Netherlands
Germany
France
Eurozone
Italy
Spain
CPI Inflation forecasts 2014-15 % pa
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Sources: Notes: Breakeven production cost estimates vary widely. Above reflects the approximate mid-point of estimates from various oil analysts. As of 2 December 2014
Oil Prices Drop 30% since June Brent at $72 and WTI at $68
$40
$50
$60
$70
$80
$90
$100
$110O
ct-1
3
Nov
-13
Dec
-13
Jan-
14
Feb-
14
Mar
-14
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep
-14
Oct
-14
Nov
-14
Oil
pric
e pe
r bar
rel,
US
D
US Bakken (North Dakota): ~$65 / barrel
US Eagle Ford (Texas) : ~$60 / barrel
Canada Oil Sands: ~$75 / barrel Breakeven extraction costs
Conventional Middle East: ~$25 / barrel
Barents Sea (Arctic): ~$80 / barrel
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How low can we go?
Ten Year Bond Yields: Change in 2014 December 2, 2014 US - 80 bps 2.23% Canada - 75 1.94% UK - 108 1.90% Germany - 119 0.74% Japan - 30 0.44%
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1. Lower for a Very Long Time 2. Lower for Longer 3. Higher Gradually 4. Higher Sooner 5. Boom Bust
Interest rate scenarios Real Estate that fits different macro environments
Scenarios
RE Return Outcomes
1. NOI Falls, Values Stay High 2. NOI Flat, Values Stable 3. NOI Rises, Values Stable 4. NOI Rises, Values Decline 5. Values Rise, Then Fall
LaSalle 2015 Real Estate Universe
Total Investable Real Estate US$ 49.6 trillion
Institutional Public & Private US$9.2 trillion
Public Real Estate US$ 3.2 trillion
Source: LaSalle Investment Management Analysis as of 3Q 2014
Defining the Universe
Public Real Estate The gross asset value of real estate owned by REITs and REOCs listed on public exchanges. Includes vertically-integrated development companies in emerging markets, but not exclusive homebuilders.
Institutional Invested Real Estate The gross asset value of all professionally managed real estate portfolios, in both public and private vehicles.
Total Investable Real Estate Total commercial (office, retail, industrial, niche) and rented residential buildings. Owner-occupied residential homes are not included.
Real Estate: Significant Asset Class But can be difficult to access for Institutions
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Outstanding Debt Global Equity MarketCapitalization
Total Commercial Real Estate
Estim
ated
Val
ue, T
rillio
ns
Institutional Owned Portion
Fina
ncia
l and
C
orpo
rate
Deb
t G
ov’t
Deb
t
Source: Bank of International Settlements, World Federation of Exchanges, LaSalle Investment Management. Note that equity and debt outstanding includes REITs and real estate loans, respectively, resulting in some double-counting. Debt estimates as of Mar. 2014. All other estimates as of 3Q 2014.
79%
5%
16%
Institutional-Owned
Estimated Real Estate Universe by Property Type New Analysis in 2015 Highlights Under-Allocation to Niche and Residential
Source: IPD, IPF, US Bureau of Economic Analysis, LaSalle Investment Management Analysis as of 3Q 2014
51%
10%
39%
Total Real Estate
Office, Retail &Industrial
Niche PropertyTypes
Private RentedResidential
Niche and residential property is a much larger share of total real estate than it comprises in institutional portfolios.
Total Real Estate: Past, Present, and Forecast Regional Share of the Universe Over Time
0
10
20
30
40
50
60
70
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Trill
ions
, USD
Middle East and AfricaEuropeAsia PacificAmericas
Source: LaSalle Investment Management Analysis as of 3Q 2014
32%
28%
35%
28%
31%
34%
52% 50%
41% 37% 35%
32%
22% 21%
0%
10%
20%
30%
40%
50%
60%
0
500
1,000
1,500
2,000
2,500
Australia UnitedStates
France Canada Japan China UK Germany
List
ed S
hare
of I
nstit
utio
nal U
nive
rse
Siz
e of
Uni
vers
e ($
BN
)
Listed Real Estate Private Institutional Owned Real Estate
Listed Share of Institutional Real Estate
1
Listed Real Estate Market Share by Country
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EPRA/NAREIT Global Index
Source: Bloomberg , Green Street Advisors Latest as of 2 December 2014 Note: The EPRA/NAREIT Global Price Index contains all publicly quoted real estate companies that meet the EPRA ground rules in 21 countries across Europe, North America, and Asia.
Global REITs up 22.6% YTD
1,800
1,850
1,900
1,950
2,000
2,050
2,100
2,150
2,200
2,250
2,300Ja
n-13
Feb-
13M
ar-1
3
Apr
-13
May
-13
Jun-
13
Jul-1
3
Aug
-13
Sep
-13
Oct
-13
Nov
-13
Dec
-13
Jan-
14
Feb-
14M
ar-1
4
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep
-14
Oct
-14
Inde
x
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DTU Secular trends Demographics, Technology & Urbanisation (“DTU”)
Ageing society Next generation of RE consumers
Forces Driving Real Estate Demand Macro Trends
Tech clusters & workplace connectivit E-commerce & logistics
World’s population: >50% urban Large cities get larger & denser
Demographics
Technology
Urbanisation
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0%
5%
10%
15%
20%
25%
30%
35%
2014 2025
Senior citizens aged 65+; working-age population aged 15-64. Source: Oxford Economics. Forecast as of October 2014.
Age Dependency Ratios to Rise Growth in Age 65+ Population to Outpace Workforce Growth
Age dependency ratios to rise by between 2.5% (Sweden) and 9.4% (Hong Kong) between 2014 and 2025.
Population Age 65+ as a Percentage of Working Age Population
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Source: Oxford Economics. Forecast as of October 2014.
Net Migration as a % of Population Canada to See Strongest Positive & Mexico Strongest Negative Migration
-2%
-1%
0%
1%
2%
3%
4%
5%Net Migration (2014-20) as % of Total Population
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Net Migration as % of Total Population Growth: 2014-25
North America and Australia to See Strong International in-Migration
Source: Oxford Economics.
Boomer ages: 50 to 68
Millennial ages: 20 to 35
2
Five Surprises to watch for in 2014
Air Quality Danger shuts down Beijing Keystone XL Pipeline Shifts to the Pacific Coast QE withdrawal: More long-term good for Real Estate than harm Mark Carney: “The Bubble Boy” (Daily Mail Headline) Coastal Flooding Hits One City on the World Bank List
Five Surprises for 2015
1. Multiple residences sell for $75 to $100 million each 2. Mansion Taxes in London & NYC 3. A REIT’s market cap reaches $75 Billion 4. Women’s World Cup: Attendance Record 5. Tall Building Curse: China and Saudi Arabia
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Contact
Jacques Gordon Global Strategist Chicago +1 312 228 2760 [email protected]
Important Notice This information is intended to assist professional investors in deciding whether they wish to consider the investment further. This publication does not constitute an offer to sell, or the solicitation of an offer to buy, any securities or any interests in investment funds sponsored by, or the advisory services of, LaSalle Investment Management and is subject to correction, completion and amendment without notice. Any such offer, if made, will only be made by means of a confidential prospectus. The prospectus will include information regarding investment risk and investors should have the financial ability and willingness to accept these risks. All information obtained from third party sources is believed to be reliable and current, but accuracy cannot be guaranteed and we do not undertake to update any information contained in this document. All assumptions, figures and calculations contained in the information must be independently verified by the professional investor. This publication has been prepared without regard to the specific investment objectives, financial situation or particular needs of recipients. No legal or tax advice is provided. Recipients should independently evaluate specific investments and trading strategies. By accepting receipt of this publication, the recipient acknowledges that this publication is confidential and agrees not to distribute, offer or sell this publication or copies of it and agrees not to make use of the publication other than for its own general information purposes. Copyright © 2014 LaSalle Investment Management. All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior permission of LaSalle Investment Management.