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Fprop Snapshot
Q1 2015
Fprop Investment Property Markets
GDP growth - 2014 (E) = 3.3%, 2015 (E) = 3.5%. Household consumption improving due to low oil prices, strong wage growth and improved employment prospects. Impact of c700,000 Polish mortgages denominated in CHF expected to be contained.
Confidence - manufacturing PMI (Jan-2015) = 55.2 – rising again.
Inflation - CPI -0.9% YoY (Dec), negative since Jul-2014.
Interest Rates - 2% since Oct-2014, lowest on record, but further cuts expected.
FX - at mid-point of recent (since 2010) range of PLN 4.3/ €1 - PLN 4.1/ €1. Expected to strengthen vs €.
Euro Malaise - Poland should benefit indirectly from Eurozone QE. Is still not expected to adopt Euro until after 2020.
Politics - General Election in Oct-2015. Result forecast to be another centrist coalition.

Transactions in 2014 - c€3.2bn (2013: €3.4bn). Foreigners (mainly German, UK and US) once again accounted for c90% of volume.

Occupational market - total take-up exceeded 1 million m2 in 2014 with 445,000 m2 leased outside Warsaw. Vacancy rates from 6% in Krakow to 16% in Szczecin. Warsaw = 13% (and rising).

Investment market - prime yields unchanged at c6% in Warsaw and 6.5% in regional cities.

Supply - expanded by 600,000 m2 in 2014, forecast to expand by >700,000 m2 in 2015. Total supply = 6.8 million m2 of which >4 million m2 is in Warsaw.


Occupational market - rents stable to falling. >20 new international retailers entered Poland in 2014.

Investment market - prime yields = c5.9% for shopping centres, c7.5% for retail warehouses. Demand spreading out from Warsaw to smaller assets in regional cities.

Supply - 41 new retail schemes under construction plus 8 shopping centre extensions, amounting to 770,000m2. Total retail space in Poland = 12.4 million m2 of which shopping centres account for 8.8 million m2 (up from 3.8 million m2 in 2004). Shopping centre density increased in 2014 to 229m2/ 1,000 residents, forecast to increase to 248m2/ 1,000 residents in 2015. Western European average = 260m2/ 1,000 residents.

Occupational market - record take-up in 2014 - >2.5 million m2 leases signed, 71% of which for new deals, 29% for renewals. Vacancy rate reduced by 5% over 2014 to end at 5.5%.

Investment market - prime yields tightened to c7%.

Supply - 1 million m2 of new space delivered in 2014 (2013: 400,000m2). Total supply of modern industrial space in Poland = c8.8 million m2.
Banks - well capitalised and willing to lend.

GDP growth - 2014: +2.6% (E), slightly less than expected. 2015 (E) = +2.7%.
Confidence Jan-2015 - manufacturing PMI = 53 (>50 since Apr-2013), construction PMI = 59.1, services PMI = 57.2. All up vs Dec-2014.
Inflation - CPI fell to 0.5% yoy in Dec-2014, its lowest since May 2000. RPI fell to 1.6%.

Interest Rates - 10-yr Gilts at new low of c1.5% p.a.





Volume (2014): £65bn, surpassing 2006’s peak of £62bn and up 16% on 2013. But investors much less reliant on debt finance this time.



Rental value growth (2014): +2.7% (2013: +0.6%), led by Central London offices. Q4 +1.3%, highest since Q3 2007.



Capital value growth (2014): +12.9% (2013: +4.6%).



Total Return (2014): 19.7% (2013: 11.5%).



All Property average yield now at 5.6%.





Rental value growth (2014): +5.3% across UK and +8% in central London.



Capital value growth (2014): +16.5% across UK and +18.4% in central London.



Total Return (2014): 22.7%



Planning - awaiting result of govt consultation to determine whether relaxation of Permitted Development Rights (PDR) will be extended to 2019.





Rental value growth (2014): +0.5% across UK



Capital value growth (2014): +8.8% across UK


Total Return (2014): 15.4%

Rental value growth (2014): +3% across UK

Capital value growth (2014): +17.8% across UK

Total Return (2014): 25.8%


House prices rose by 2% m/m in Jan, largest monthly gain since May-2014. Record low mortgage rates, rising real earnings and SDLT cuts from Autumn Statement expected to result in continued price rises.



Mortgages - approvals rose in Dec-2014, first rise since Jun-2014.


Help to Buy - >77,000 buyers aided by scheme so far, 41,533 via equity loan element (equity loan av £42k each, 94% outside London, 83% to first-time buyers).

First time buyers - 326,000 in 2014, highest since 2007, with average deposit of £29,218. New “Starter Home Initiative” (in consultation phase till mid Feb-2015) - whereby first-time buyers <40 yrs old to be offered 20% discount on 100,000 new homes to be built on under-used or unviable brownfield land. Planning costs and levies to be waived in return for a promise from housebuilders of such discounts. >30 house builders including Barratt, Persimmon, Taylor Wimpey have pledged their support, as well as several local councils.

Supply (housing starts, England) - forecast by RICS to rise in 2015 to c155,000 (2013: c125,000, 2012: c100,000) - encouraging trend but still insufficient to address the more rapid growth in population.
  Over supply (offices and retail).
Illiquid market.
Euro malaise.
Global currency wars.

Potential ill effects of overly loose monetary policy - asset values inflated.
General Election in May-2015.
Interest rate rises (although timing becoming more distant).
Global currency wars.
Fprop Investment Strategies - to invest with us please contact Jeremy Barkes
Investment - targeting higher yielding commercial property to generate a minimum IRR & ROE of 15% p.a. (geared).

Investment - targeting all property classes to generate a total return of 7% p.a. (ungeared);
Development - targeting vacant/short lease office properties for conversion to residential use.
Fprop Property Requirements
Investment Property:
Minimum 7.5%+ net initial yields;
Cities with catchments of 50,000+;
Fully or partially let with or without asset management angles;
All sectors considered - focus on offices, retail and mixed-use;
Lot sizes of €5m+ with no ceiling.

1. Investment Property:
Minimum 6% net initial yields - unless partially vacant, in which case lower;
Fully or partially let with or without asset management angles;
All sectors considered - including offices, retail, leisure, industrial, logistics, residential, student accommodation;
Lot sizes £2m - £25m.
2. Development Property:
Offices & Office Parks - vacant/ short leases;
UK wide but ideally Greater London/ the South;
Any lot size.
Fprop Diary
Contact Fprop:
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Jeremy Barkes
Director, Business Development
+44(0) 20 7340 0270

Richard Digby

Funds managed by First Property Group ranked No.1 vs Investment Property Databank (IPD) Central & Eastern European (CEE) universe over the eight years to 31 December 2013, having previously ranked No.1 over the three, four, five, six and seven years to 31 December 2008, 2009, 2010, 2011 and 2012 respectively.
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