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Fprop Snapshot
Q4 2015
 
 
 
 
Fprop Investment Property Markets
 
 
 
POLAND:
 
 
GDP growth - 2015 (E) = 3.5%, 2016 (E) = 3.5%.
 

 
Politics - General Election of Oct 2015 won by conservative (but apparently less business friendly) Law and Justice Party (PiS), ousting Civic Platform Party (PO) – resulting in the first non-coalition government since fall of Communism.

PiS officials have pledged to use all available
monetary and fiscal policy tools to boost GDP growth towards 5%-6% p.a:

Interest rates - expected to be cut by 50bp to 1% in Q1 2016, despite inflation expected to be trending >0% by Q1 2016.

New taxes possible, including for retailers and banks.
 

 
General - external accounts should be boosted by lower oil prices, given Poland is a significant net oil importer.
 

 
FX - EUR 1 / PLN 4.24. Strengthened throughout 1H 2015 but now settled around 2 year average.
 

 
Commercial property - yields for good secondary property still HIGH – c200-300bp higher than comparable property in UK / Western Europe.
 

 
SUB SECTORS:
 


 
Offices -
Total modern stock = 7.4 million
m2, of which c450,000m2 was completed 2015 YTD. A further 1 million m2  in development pipeline.

Take up YTD = 977,000
m2 , up 32% y-on-y. Vacancy rates fell in 3Q but forecast to rise again in 2016 due to new development.




 
Retail -
Total modern stock = 10.6 million m
2 with further 760,000 m2 under construction.

Vacancy rate for largest 15 markets = 3.1%.

New supply in 2015 forecast at 620,000m
2, of which extensions to existing centres constitute c33%.
 


 
Industrial -
Total modern stock = 9.7 million m
2.

Vacancy rate = 5.3% - relatively stable.

592,000m
2 under construction, two thirds of which is expected to be completed in 2016.
 

 
CONCERNS - new government less business friendly than its predecessor.



 

 
 

 
UNITED KINGDOM:
 

GDP growth - 2015 (E) = 2.6%, 2016 (E) = 2.4%;
GDP now 5.9% above pre-crisis peak reached in Q1 2008. 

 



Inflation -
2015 (E): CPI = 0.3%, RPI = 1.2%;
2016 (E): CPI = 1.7%, RPI = 2.7%.
 
 

Commercial property
Data from IPD UK Quarterly Property Index, Q3 2015.

Total return YTD = 9.9% of which 3.7% was attributable to income returns.

Net initial yield for All Commercial Property back to 2007 levels:

2015 Q3: 4.9% (equivalent yield = 5.9%);
2007: 4.9% (equivalent yield 6.0%).

Market expectation that yield stabilisation is approaching, with future gains expected from rental growth.

Improving business confidence is leading to reduced tenant default rates and increased industrial and office rents.

 
 

PDR - automatic right to convert offices to residential use to be extended indefinitely, but details yet to be announced.

 
 
CONCERNS - weight of investor capital making it difficult to find value.
 
 
 
 
 
Fprop in Poland
 
  …has been earning ROE >20% pa. for past several years;
 
 
…is ranked No. 1 vs IPD CEE universe for the annualised periods from the commencement of its operations in Poland in 2005 to the end of each of the years between Dec-2008 and Dec-2014.
 
 
 

 
Fprop in UK:
 
 
…has delivered a dividend yield to its fund investors from ungeared good "secondary" commercial property c6% pa since 2010;
 
 
…has earned a return on equity of 53% and IRR of 98% pa for investors in its development fund, established Oct 2013;
 
 
…is currently investing a £125 million fund on behalf of Shipbuilding Industries Pension Scheme (SIPS).
 
 
 
 
 
 
Fprop Investment Strategies
 
 
 
POLAND:
 
 
Investment - targeting higher yielding commercial property to generate a minimum IRR & ROE of 15% p.a. (geared).
 
 
 

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

 
UNITED KINGDOM:
 
 
All sectors considered - including offices, retail, leisure, industrial, logistics, residential, student accommodation, properties suited for development and redevelopment;
 
 
Lot sizes £2m - £25m;
 
 
Minimum 6% net initial yields - unless partially vacant, in which case lower;
 
 
Fully or partially let with or without asset management angles.
 
 
 
 
 
 
 
Fprop Diary
 
 
 
 
 
 
 
 
 
Contact Fprop:
 

 

Jeremy Barkes
Director, Business Development
 
+44(0)20 7340 0270
http://www.fprop.com


 
1000 Companies to inspire Britain in 2015  
     
 
IPD  
FPAM funds have ranked No.1 versus the Investment Property Databank (IPD) Central & Eastern European (CEE) universe for the annualised periods from the commencement of its operations in Poland in 2005 to the end of each of the years between 31 December 2008 and 31 December 2014.
 
 
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