lasalle's macro indicators - november 2014 · 02-12-2014 · macro outlook: low-low-low =...

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

LaSalle Investment Management | LaSalle’s Macro Indicators

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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


| 14

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

LaSalle Investment Management | LaSalle’s Macro Indicators | 15

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


| 17

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


| 18

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.

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lasalle's macro indicators - november 2014 · 02-12-2014 · macro outlook: low-low-low =...

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