Dan Crossley, partner, WHR Property Consultants - where is the investment market today and where is it heading?

1. Presentation by Dan Crossley, Investment Partner,
WHR Property Consultants LLP
WHERE IS THE INVESTMENT MARKET
TODAY AND WHERE IS IT HEADING?’
Place North West AGM
Thursday 11 April 2013

2. Introduction
• WHR is now 8 and a half years old
• Main disciplines include Investment, Office and Industrial
Agency, Rating and Professional and Building Surveying.
• Wide representation – large and small transactions
• WHR are currently the largest independent firm of surveyors
in the North West
• WHR now have 18 fee earners based in Manchester office.

3. Subjects for discussion
• Where is the investment market currently?
UK ‘All Property’ –volume of the investment market over the past
10 – 12 years, highlighting the difficult periods of 2007 onwards.
Regional – (North West). How the North West is fairing in relation
to other regions.
• The London and “Other Regions” Divide
• Manchester hosts the X Factor – Manchester and North
West are on the radar ‘globally’
• Supply – Where is it?
• Demand – Demand is back , but what for?
• Where is it all heading? - 5 year forecasts
• Outlook

4. Where is the Market? –UK “all property”
• In 1999 the total transactions were approximately £20 billion.
• Then an almost 45o
projection up to the peak in 2006 with nearly £60 billion.
• Sharp drop to £22 billion in 2008 – when it was really biting.
• Significant jump in 2009 – 2010 of £11 billion to £34 billion.
• Relatively constant for the past 3 years at between £32 - £36 billion
Source: IPD UK Property Market Overview – Feb 2013

5. Where is the market - Sector Analysis 2012
• Heavily distorted by London
transactions
• This shows physical trades, but not
necessarily reflective of demand.
• Retail most startling - would expect
this to rebalance.

6. Where is the market – Sector Analysis -Total
Returns 2012
13.0
0.7
-0.2
-0.9
-1.8
-3.2
10.2
-5.9
-4.0
-2.3
-7.2
-2.9
2.5
1.3
1.4
-1.1
1.3
-10 -5 0 5 10 15
London West End
Birmingham
Bristol
Glasgow
Leeds
Manchester
Total returns in 2012 %
Standard Retail Office Industrial
13.0
0.7
-0.2
-0.9
-1.8
-3.2
10.2
-5.9
-4.0
-2.3
-7.2
-2.9
2.5
1.3
1.4
-1.1
1.3
-10 -5 0 5 10 15
London WestEnd
Birmingham
Bristol
Glasgow
Leeds
Manchester
Total returns in 2012 %
Standard Retail Office Industrial

7. The London and “other regions” Divide
• Latest IPD results reveal gap between London and the rest of
the UK widened to 35% since 2009.
• 2012 The most challenging year since the downturn
• Prime London offices yield : 4.3%, Manchester : 6.3%
• IPD shows little indication of improvement for regions
• London has become “super efficient” in brokerage terms
• Large non-performing loan packages between traders in
London tend to stay in London.
• Assets sold in London after 2009 have recorded at 25% profit

8. Manchester hosts the X Factor
(and the North West)
• Global brand
• Most oversubscribed universities in the
country
• Good city centre logistics – airport, rail,
road
• Limited supply of new developments
(office & Industrial)
• Big sheds in particular in short supply
• Relatively limited supply of existing
• Only regional city showing rental growth
(Offices 2.2%)
• Strong local Government support and
leadership (Manchester)
• Manchester is attracting more foreign
property investment than the other big 6
UK cities (except London)

9. Manchester hosts the X Factor
(and the North West)
• Manchester is attracting more foreign property investment
than the other big 6 UK cities (except London)
• Manchester more “German” than British
• Genuine demand globally (second city?)
• No 2 on a shortlist of 2

10. Supply – where is the supply?
• Banks Holding Back – depends on who they are and their outlook
• Distressed debt trades – widespread over past 24 months – now abating?
• Very few institutions selling
• Large proportion of property companies now selling – consensually or
“encouraged”
• Encouraged annual debt reduction targets that need to be achieved as
part of new facilities
• Limited new development “no new speculative industrial space above
100,000 sq ft since 2008
• More forward funding as “build to suit becomes viable”
• Development “tipping point” close – making development sustainable
• Not seeing the spin offs from the non performing loan transactions just yet

11. Demand – Demand is back in town,
but what for?
• Long leased prime is the ultimate
• Long leased secondary out performed short leased prime (this may change)
• Bookended market for past year
– Prime demand is solid. Annuity buyers
– “Double Digit” buyers. Investment managers/property companies
• “Investment managers” really came into play in 2012
• Asset management opportunities in demand – but are they not really chasing
income?
• Institutions now showing strong signs of activity – going up the risk curve to
get stock.
• Over 55% of Q1 2013 transactions to institutions and managed funds
(purchasers) – very few sales by institutions

12. Where is it all heading?
All Property Annual Rental Value Growth
Forecast
All Property Annual Capital Value Growth Forecasts
• Rental growth expectations positive –
first time in 5 qtrs
• 2013 Negligible growth
• 2016 Peak
• 5 Year average of 1.7%
• Still below long run average (3%)
• Negative capital value growth
continues (2013)
• Growth peak in 2015
• Growth thereafter still above 1%
• Below long run average of 2.5%

13. Where is it all heading?
All Property Annual Total Return Forecasts
• 2013 still affected by negative
capital value growth
• Reduced income return of 6% to
total of 5.2%
• 2014 expected to be year of
positive capital value growth.
• Increases to 7.4% - the 5 year
average
• Income return 6.1% capital return
1.2%
Source: Investment Property Forum UK
Census Forecasts – Feb 2013

14. Outlook