Monday, 27 October 2014

Is it still all rosy in Africa?


Ernst & Young recently released a report entitled Africa 2030: Realising the possibilities. The report looks at the growth of the continent over the last 15 years (since the Economist dubbed Africa ‘The Hopeless Continent’) and maps Africa’s predicted growth over the next 15 years.

The steady 5% year-on-year growth over the last 15 years has, on the whole, been right across sub-Saharan Africa, with several economies including Angola, Ghana, Ethiopia, Tanzania, Mozambique, Nigeria and Zambia, growing at over 7% and E&Y forecasts more of the same.

The study identifies a number of contributory factors: sound economic management; improvements in business environment; diversification; political reform; and technology. We should add urbanisation and improvements in education and health which are fuelling the rapidly increasing population levels.

The number of requests we are receiving for support and market intelligence from corporate occupiers exploring Africa has never been so high – until recently. Over the last three months the number of actual engagements has slowed, and I believe this is due to a few facts:
• The Ebola crisis has hit West Africa hard, and not only from a humanitarian perspective. There has been a knock-on effect to both international travel and cross border trade. The challenges of excessive bureaucracy and corruption are well documented and this tragic outbreak has not helped to ease the perception of Africa as a difficult place to do business.
• Low oil prices are forcing the Oil & Gas companies, who have vast operations across Africa, to re-evaluate investment plans in the short and medium term. 
• An increasing number of investors and occupiers are looking for opportunities, but there is very little quality product and no one seems to be willing to take the plunge without a robust secondary market.

Hopefully these are short term issues: Ebola will be contained; the US will still need African oil and global oil prices will return; and new developments will come on line.

The potential of Africa will not be realised overnight. Africa’s rise has been dramatic yet from a low base, and a firm foundation has now been laid. The next stage in its evolution will be harder as it fights to meet unrealistic expectations, but business continues to be done and the landscape continues to improve.
 
Author: Nick Lambert, Head of Complex and Emerging Markets, GCS EMEA

Tuesday, 7 October 2014

Hot to Trot – Western European Office Market Heats Up. Are you ready to take advantage?


The demand for office space across Western Europe has hit its highest level since the financial crisis. Tim Hamilton, Senior Director - EMEA Global Corporate Services, explains what is driving this trend and what it means for real estate corporate occupiers.


Stat Attack
The second quarter of 2014 has seen a 21% uplift in office take-up on the first quarter across Western Europe. This marks the highest second quarter take-up since the equivalent period in 2009 -  the height of the financial crisis. Across Europe as a whole, aggregate take-up rose by a healthy 12.2% compared to the first quarter of the year.

Driving this is strengthening activity in some core markets namely London, Milan and Lisbon while Paris is showing signs of an upturn in fortunes too.  London saw a 29% quarterly take-up increase compared to the first quarter, with corporate occupiers returning to the market with new office space requirements. Similarly, Milan’s take-up more than doubled, across the same period, to 94,000 sq m while Lisbon recorded one of its strongest quarters in recent years. In addition, the Paris office market which has largely been subdued during the downturn with occupiers lacking the confidence to relocate, posted its highest office take-up level for two years in the second quarter, representing a 28% uplift on the first.

The impact?
Often, a direct knock-on-effect of increased demand for office space is vacancy declines. We’ve seen this across Western Europe with the overall vacancy rate falling in the second quarter. Drilling down further, Central London saw a third consecutive quarterly decline in vacancy rates with prime space now in very short supply. Likewise, Brussels, Paris and Amsterdam also contributed to vacancy dips with ever increasing demands for office space in prime locations. Meanwhile, Frankfurt saw the most noticeable drop, where vacancy fell sharply for the second consecutive quarter driven by the removal of obsolete stock and the conversion of older commercial buildings into residential units.

Crucially, vacancy rates effect rental costs and this is starting to filter through into some key markets. Madrid, for example, has seen its prime rent increase from €24.50/sq m per month to €24.75/sq m per month in Q2, which although on the surface seems relatively small, it represents the Spanish capital’s first rental growth since the recession, symbolic of improved economic stability. The strongest performing office markets continue to see the steepest rises in prime rents, Dublin saw rents rise by a huge 14.2% in Q2 to €430.50/sq m per annum driven, in part, by strong demand from Technology, Media and Telecoms occupiers. London’s West End market recorded a 2.4% increase in rental growth across the same period.

So, why the upturn now?
During the recession the overwhelming, yet understandable, market trend was one of cost consolidation. This was felt worldwide and no sector was immune. Today, the market is not yet as buoyant as it was pre-recession, however, there is ever increasing corporate appetite to lease or acquire space, particularly across Western Europe. This  is encouraging as it signifies that occupiers who have been hamstrung in recent years by tightening budgets resulting in a contraction of take-up levels, are now in a position to flex their muscles and take new space.

The future?
As the macro-economy and market strengthens, the growth in prime office rents is likely to become more widespread over the next 12 months particularly given the short supply and a relatively thin office development pipeline. Having spent a number of years taking advantage of falling rents, occupiers will need to start factoring in potential future rental increases into their strategic decision making.

Tim Hamilton, Senior Director - EMEA Global Corporate Services

Tuesday, 1 July 2014

NEW ERA FOR UK DATA CENTRE INDUSTRY


Today, July 1, 2014, marks the launch of the first data centre Climate Change Agreement (CCA), a significant milestone for the industry.  The data centre CCA, which has been in planning for four years, is formal recognition by the UK government that the sector is mature and significant to the economy and requires its own legislation and legal framework to sustain industry growth.


What is a CCA?
CCAs, first introduced in 2001, are negotiated agreements between government and energy intensive sectors designed to minimise energy consumption through the implementation of energy efficient measures to meet UK’s carbon reduction targets.  CCA participants are incentivised to meet challenging energy efficiency targets via a reduction of, or exclusion from, specific carbon taxes (CCL and CRC). Prior to today, approximately 50 CCAs were already in operation in the UK covering various sectors. 
Andrew Jay, Executive Director, Data Centre Solutions

What does it mean for the data centre industry?
In essence, participation in a CCA will require each data centre to work towards legally binding energy efficiency targets over the period of the agreement and thus contribute to the overall objective of the CCA, which is to improve the energy performance of the data centre sector as a whole. Ultimately, this should see carbon tax liabilities associated with electricity reduced for the industry.
The first agreement is immediately effective and will run until 2020 with a sector target of 15% energy reduction in power usage effectiveness (PUE).  In addition, colocation data centre operators are required to reduce non-IT energy consumption by 30% between 2011 and 2020 via the implementation of energy efficient measures.

What are the benefits of a date centre CCA?
As this new legislation is sector specific, focused on colocation data centres, there are a number of benefits. The new legal framework, energy stewardship and governance will improve industry and investor confidence which should increase industry employment and ultimately growth. This has a knock-on-effect of improved EU and even global competitiveness.  From an environmental standpoint, the new targets will ensure a sector is more energy efficient going forward.

What does this mean for the future of the industry?
Today is a hugely significant milestone for the data centre sector. The data centre specific CCA recognises that this sector underpins the UK economy but to date has been left unchecked and largely misunderstood by policy makers. The formal legislation also signals an awareness that the industry will continue to evolve and become more competitive as data centre operators will be incentivised to take vital steps to improve the energy performance of their assets. This is a very positive step for all associated parties now and in the future.

To register for a data centre CCA or for further information please visit:
http://www.techuk.org/about-the-cca 

Or email:
Andrew.jay@cbre.com
techuk@cclevy.com

Friday, 6 June 2014


Investment in Africa strengthens continent’s status - attracting multinationals

As multinational interest in Africa strengthens, the potential opportunities for commercial real estate occupiers do as well.

The MSCI Frontier Markets Index (FMI), which provides equity market coverage for “frontier” markets (distinct from “developed” and “emerging” ones), has just hit its highest point since the onset of the financial crisis in 2008.

Nigeria and Kenya, two of the fastest growing economies in the Index, have largely driven growth in the index over the last three months. A fundamental driver for Africa’s increasing influence in the Index, which has a collective weighting of 32.5% spread across five countries, is an increase in investments from multinational companies. Central to this, on the real estate occupier side, is the low labour costs, growing populations, increased disposable incomes, burgeoning economies and the potential for future growth in select African markets.
Nick Lambert, Head of Complex & Emerging Markets
This contrasts to most developed markets, where despite broad top-down economic improvements, the commercial occupier trend for business remains one of consolidation, cost savings and streamlining of operations.

As of 2 June 2014, Qatar and the United Arab Emirates moved out of the MSCI FMI into the MSCI Emerging Markets Index (EMI). Qatar’s improved economic conditions highlight a path forward for African economies.

As investment into Africa increases, more companies will open operations on the ground. This is a positive development for corporate occupiers expanding into Africa and is a trend that is likely to strengthen over time.

Any questions? Contact Nick Lambert, Head of Complex & Emerging Markets, EMEA - Global Corporate Services