Corporate Real Estate Market in Europe 2021

EUROPE EUROPE COVID-19 CRE 360 COVID-19 REPORT CRE 180 SITUATION

SITUATION AFTER LOCKDOWN OUTBREAK SITUATION OVERALL SITUATION REAL ESTATE PERSPECTIVES ECONOMIC OUTLOOK SANITARY MEASURES ECONOMIC OUTLOOK ECONOMIC OUTLOOK REAL ESTATE PERSPECTIVES SUPPORT SCHEMES REAL ESTATE PERSPECTIVES OUTBREAK SITUATION CITY FOCUS OUTLOOK ECONOMIC SANITARY MEASURES SUPPORT SCHEMES GLOBAL RESEARCH APRIL 2021

AGENDA CONTENTS 1 Overall Situation 01 2 Economic Outlook 02 3 Real Estate Perspectives 03

4 11 17

E X E C U T I V E S U M M A RY IN A NUTSHELL

In the Eurozone, governments were forced to maintain or tighten health restrictions as cases rose again. The timing of the recovery will depend essentially on the effectiveness of restrictive measures and the acceleration of vaccination campaigns. In Europe, the main recovery should be in H2 2021.

The economic rebound has been postponed again No oversupply expected in Europe

CK LE I CYKMTEOS S EA DG I TE S THE ECONOMIC REBOUND IN EUROPE HAS BEEN M A S TPOSTPONED ER TE XT AGAIN

THE UPTURN IN INFLATION COULD BE SHORT-LIVED

KEY MESSAGES

The upturn in inflation could be short-lived

The recent acceleration in prices is being driven by temporary factors (higher crude oil prices, changes in VAT, etc.). These temporary effects should dissipate at the beginning of next year.

BETTER TIMES AHEAD FOR INVESTMENT Investment decreased 34% over the last 12 months compared to the pre Covid-19 period. However it should see improvement in the next quarters as the pandemic comes under control.

TOWARD AN ACCELERATION OF TAKE-UP IN 2021 Toward an acceleration of take-up in 2021

Better times ahead for investment

Office take-up shrank 22% relative to Q1 2020, which was not subject to Covid-19 restrictions. However, first signs of improvement compared to the end of 2020 were seen in some European markets.

NO OVERSUPPLY EXPECTED IN EUROPE Vacancy rose 130 bps on average in Europe’s 28 main markets.

However, it remains low in the most central submarkets and is mainly the consequence of the release of second-hand buildings.

3

OVERALL SITUATION

RESTRICTIONS ACROSS EUROPE EUROPE

TO

GRADUALLY

EASE

As of April 23th

RESTRICTIONS

Total lockdown High level of restrictions Curfew STOCKHOLM

Low / moderate level of restrictions Lockdown

High level of restrictions Gradual easing of restrictions

« Coronapas »

DUBLIN HAMBURG Local Lockdown + curfew AMSTERDAM

Lockdown + curfew

Until 28.04

Until 27.04

LONDON BRUSSELS

Partial lockdown + curfew

Lockdown + curfew Until 02.05

TOULOUSE

Gradual easing of restrictions LISBON

MADRID Curfew BARCELONA

From 11 pm

DÜSSELDORF COLOGNE FRANKFURT

PARIS

Local Lockdown WARSAW

BERLIN

PRAGUE

Gradual easing of restrictions

Local lockdown MUNICH VIENNA + curfew

Curfew

BUDAPEST From 10 pm

LYON

Local lockdown BUCHAREST

MILAN

Curfew + restrictions ROME

Lockdown + curfew Until 26.04

Source: Government announcements.

5

C O N F I R M E D D A I LY C A S E S O F C O V I D - 1 9 A THIRD

WAVE

IN

EUROPE

Confirmed daily cases in the world Asia-Pacific

Europe

United States

Rest of the World

•

In many countries the number of new Covid-19 cases began rising again at the end of 2020, forcing governments to maintain or tighten health restrictions. However, the acceleration of vaccine campaigns is bringing some hopes in 2021.

•

Currently, around 750,000 new cases are being reported each day in the world. This figure is reaching an all time high.

•

As a result of the rapid roll-out of Covid-19 vaccines in some parts of the world, cases started to decrease quickly in the US and in the UK.

•

After a first and second wave, confirmed cases around the world decreased between February and March. However, the situation is worsening again in April and cases are growing at a higher pace than during the first or second wave. New measures have been implemented to cope with this third wave.

•

Moreover, the emergence of new variants all over the world may now jeopardise the effect of restrictions and of the vaccination campaign.

900 000

7-day moving-average

800 000 700 000 600 000 500 000 400 000 300 000 200 000 100 000 0 March

April

May

June

July

August 2020

Sept

Oct

Nov

Dec

Jan

Feb

March

April

2021

Sources: World Health Organisation.

6

N U M B E R O F D A I LY C O N F I R M E D C A S E S ARE

WE AT THE

END

OF

THE

THIRD

WAVE?

Daily cases

70 000

7-day moving-average

60 000

•

A third wave of infection is now hitting Europe as the number of daily cases is increasing again in a lot of countries.

•

The easing of lockdown measures just after the Christmas holiday has driven an increase in cases.

•

The high level of daily infections across Europe and the emergence of more transmissible variants have pushed governments to implement again restricting measures to fight COVID-19 resurgence.

•

Indeed, nations across Europe are implementing lockdowns, curfew, and border closures.

•

The strong increase in the number of cases across Europe means that the race to vaccinate the population will continue to dominate 2021. However, the pace of vaccination may appear slow in the EU, compared to other countries such as the US or even the UK.

Spain United Kingdom

50 000

France Germany

40 000

Poland 30 000

Italy Belgium

20 000

Netherlands 10 000

Ireland

0 Mars

April

May

June

July

August 2020

Sept

Oct

Nov

Dec

Jan

Feb

March

April

2021

Sources: World Health Organisation.

7

T H E D E AT H C A U S E F R O M C O V I D - 1 9 FATALITY RATE DEPENDS AND POPULATION AGE

ON

Fatality rate in the world Number of deaths (thousands)

600

Fatality rate

Fatality Rate

6%

Fatality rate (world average) 4,7%

500

QUALITY

OF

Number of daily deaths

Number of Deaths

562

THE

5%

Number of deaths

United Kingdom Italy Poland Netherlands Belgium

HEALTHCARE •

The fatality rate differs greatly from country to country. While the fatality rate has stood at around 5% since the beginning of the outbreak in China, the fatality rate across the world is around 2.1%. For other countries with more strongly resourced healthcare systems (Netherlands, Switzerland, etc.), the fatality rate can even be lower.

•

Population age and living arrangements are important factors for the number of deaths.

Risks are higher for countries where several generations live in the same place (Italy or Spain for example). Care home exposure seems to be the other factor (UK). This means that older people are not properly isolated and have a greater chance of catching the virus.

•

The United States is now the country with the highest number of deaths in the world, followed by Brazil.

•

With the resurgence of the virus, the number of deaths is around 11,500 per day around the world.

•

With the emergence of new and more transmissible variants, vaccination programs seem to be the absolute key for a return to normal.

Germany France Spain Ireland

4 500 4 000

4%

400

300

3,0% 2,9%

1,9%

200 1,8% 127

100

2,5%

117

101

2,3%

3%

2,5%

1,6%

1,5% 1,2%

0,7%

10 17

14

2%

2,0%

1,5%

80 77

0

3 000 2 500

2,2%

63 24

3 500

10

1%

5 5

1

0%

2 000 1 500 1 000 500 0 2020

2021

Sources: World Health Organisation.

8

VA C C I N AT I O N I N E U R O P E A RACE AGAINST THE

As of October 22nd

CLOCK

Vaccination around the World Fully vaccinated

First dose

70% 60% 50% 40% 30% 20% 10% DUBLIN

0%

AMSTERDAM HAMBURG LONDON BRUSSELS

WARSAW

BERLIN

DÜSSELDORF COLOGNE FRANKFURT

PARIS

•

•

•

As cases are surging again across Europe, the vaccination pace is crucial. The consensus is quite clear among experts: the only way out of the COVID-19 pandemic is to vaccinate the population.

The UK has the most advanced program in Europe, with more than 60% of its population that have received at least the first dose, followed by Spain, Germany, and Belgium.

However, the road is still long. In Europe, less than 7% of the population is fully vaccinated against the virus (vs 25.2% in the US and 15% in the UK).

MUNICH

VIENNA BUDAPEST BUCHAREST

LYON

Vaccination rate (1st dose) (in % of population) > 50%

MILAN

MADRID

BARCELONA

ROME

30-50% 25-30% < 25%

9

D A I LY A I R P O R T T R A F F I C A C R O S S M A I N E U R O P E A N A I R P O R T S EUROPEAN

TRAVEL BANKING

ON

VACCINE

PASSPORTS

REFERENCE DATAPOINT: 14 APRIL 2021

1600

2019 (Reference)

2021

1400

•

Eurocontrol – an organisation that manages 90% of Europe’s air traffic publish data on daily airport traffic across Europe, comparing data to the same period in 2019 (pre-pandemic level).

•

The number of flights across Europe remains on average 64% below the equivalent day in 2019.

•

Further breakdown reveals, low cost travel is down by 84%, business travel is down by 19% while air cargo is up by 11% compared to 2019 levels.

•

The busiest airports include Frankfurt with flights approximately 64% below 2019 levels, followed by Paris CDG (-67%), Amsterdam (-67%) and Madrid (-65%).

•

Intra-European travel remains the main traffic flow. The highest domestic flows are within France, Norway, Spain and Germany.

•

According to Eurocontrol the number of bookings is now gradually improving and is likely to continue to do so as vaccination rates increase and travel restrictions are eased further. A number of European airports and airlines are hopeful the introduction of vaccine passports will help revive air travel.

1200

1000

800

600

400

Source: Eurocontrol

ZURICH

WARSAW

VIENNA

STOCKHOLM

ROME

PARIS

OSLO

MADRID

LONDON

LISBON

HELSINKI

FRANKFURT

DUBLIN

COPENHAGEN

BRUSSELS

0

AMSTERDAM

200

*Total Departing and Arriving Flights to/from the main airport hub in each city.

The comparison with previous year is made using the closest similar day.

10

ECONOMIC OUTLOOK

PURCHASING MANAGER INDEX SURVEYS TOWARD A NEW

SLOWDOWN?

• In many countries the number of new Covid-19 cases is rising again, forcing governments to maintain or tighten health restrictions. This is the case for the Eurozone, among others, where a true rebound in growth and demand has been postponed yet again. The timing of the recovery will depend essentially on the effectiveness of restrictive measures and the acceleration of vaccination campaigns, but also on spillover effects with some of its trading partners whose economies are picking up more rapidly.

• Although there are some headwinds, most of the high frequency indicators are showing an acceleration of the recovery around the world. However, the third wave is adding to the level of uncertainty, both for households and businesses, weakening the confidence of a strong rebound.

Manufacturing

Index 70

Services

60 50 40 30 20

Germany

France

Italy

Spain

United Kingdom

10 0 06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

Sources: Markit, BNP Paribas Economic Research.

12

ECONOMIC OUTLOOK WHAT

OUTLOOK

Oil crisis (1973)

8%

FOR

THE

MAIN

ECONOMIES?

World GDP

Oil crisis (1979)

Dot-com bubble (2000-2001)

Great recession (2008)

•

In late 2020, there were high hopes that the health crisis would soon improve and that economic activity would rebound in its wake. In many countries and regions around the world, the actual situation was a big disappointment as the number of new Covid-19 cases began rising again, forcing governments to maintain or tighten health restrictions.

•

Although Q1 GDP growth is expected to be positive on a quarterly basis in the Eurozone, the real rebound in economic growth and demand has been postponed again, and its timing will depend mainly on the effectiveness of restrictive measures and the acceleration of vaccination campaigns. However, we are still confident regarding the rebound as monetary and fiscal policies should continue to support activity.

•

Another source of hope that will play a nonnegligible role is the spillover effect of certain trading partners like the United States, but also China and the UK, which have already begun to ease health restrictions.

•

The consequences of the pandemic may only manifest themselves over time. The economy could still face headwinds even when the health situation is under control. The impact of ending liquidity support measures to household and businesses is one of the main concerns.

•

The changes in behaviour observed with the pandemic may also become permanent. For example, online shopping, working from home, and video conferencing may each have a significant impact on retail activities, office sector and business travel.

Covid-19 (2020)

6% 4% 2% 0% -2% -4%

71

73

75

77

79

81

83

85

87

89

91

93

95

97

99

01

03

05

07

09

11

13

15

17

19

21

GDP Growth in European countries France

10%

Germany

Italy

Poland

Spain

United Kingdom

5% 0% -5% -10% -15%

00

01

02

03

04

05

Sources: BNP Paribas, Oxford Economics, OECD.

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

13

GDP GROWTH IN EUROPE 2020/2021 DIVERGENCE

IN

RECOVERY

2020

2021

-3.2

6.1

United States

-3.5

6.9

SWEDEN

-3.0 -3.6

2.7

4.2

Japan

-4.8

3.0

China

2.3

9.2

India

-7.2

12.5

Russia

-4.5

4.0

Brazil

3.5

•

The supply side of the economy will undergo changes as value chains are modified to increase their resilience to shocks.

•

The demand side will alter as well. Changes to spending habits during lockdown – such as increased use of e-commerce - may become permanent. The demand for office space will evolve as well as more people work from home, even in a post-pandemic world.

•

Given the rapid roll-out of Covid-19 vaccines in some parts of the world and substantial fiscal stimulus, we are now more optimistic about the global economic outlook.

•

Differences persist while our US forecasts are up sharply, we have turned slightly more cautious on China, where we expect growth momentum to weaken.

•

It is in Europe where we see the greatest room for growth to exceed market expectations, powered by an accelerating vaccine programme and supportive policy mix.

4.0

IRELAND

3.4

4.4

POLAND

UNITED KINGDOM

-10.2

NETHERLANDS

6.1

-3.7

2.4

BELGIUM

-6.3

-4.1

-4.5

DENMARK

-6.8

These include higher debt burdens for governments and many companies. There is the risk that many people who have lost their jobs or are in furlough schemes will remain unemployed for a considerable time.

RUSSIA

2.6

-3.3

Euro area

•

2.2

NORWAY

World

The analysis of Covid-19’s economic consequences predominantly focuses on the near term. Yet there will also be profound longerterm consequences.

FINLAND

-2.8

FORECAST (%):

•

3.7

-3.3 GERMANY

-5.3

3.0 CZ. REPUBLIC

-6.5 FRANCE

-8.2

SWITZERLAND

6.1

-2.9

4.5

3.3

4.2

AUSTRIA

-6.6

3.0

HUNGARY

-6.0

5.2 ROMANIA

-5.7

2.5 PORTUGAL

-7.6

ITALY

5.4

-8.9

5.4

5.0

SPAIN

-10.8

Source: BNP Paribas Real Estate Research.

5.9

14

FINANCIAL OUTLOOK ECONOMIC AND

FINANCIAL

INDICATORS

%

Policy rates

Inflation

% 2,5

2,2

2,1

2,0

0,1

1,4

1,2

•

However, while the markets have caught up with the story, we continue to believe that this rise in prices will be seen only in the short or medium term. Indeed, persistent labour market slack will prevent wage growth from accelerating and structural forces (such as digitalization and demographics) will continue to exert disinflationary pressure, keeping inflation under control.

0,1

0,1

•

We are not expecting major changes in monetary policy over the coming months. The ECB could extend its Pandemic Emergency Purchase Programme (PEPP) beyond 2021 and increase its total envelope if the financial conditions tighten or if the recovery is less positive than expected.

•

Large rises in bond yields are not expected in the coming months. Along with asset buyback programmes, there is sufficient private demand to keep government bond yields low.

•

Nevertheless, there is high uncertainty over the debt created by fiscal policies that may have some impact in the longer term.

0,1

0,1

0,9

1,0

0,3

0,5 0,0

The risk of a global increase of inflation figures is now at the centre of all discussions. A mix of ingredients imply a rebound in inflation: higher prices from temporary market factors, stronger overall demand, negative supply shocks and accommodative monetary policies.

0,2

3,0

1,5

•

20

21

22

20

United States

21

22

20

UK

0,0 21

0,0

22

20

21

22

20

21

United States

Euro

22

20

UK

0,0 21

22

Euro

Government bond yields

% 8

Poland

6

Italy

4

UK

2

Spain

0

France

-2

Germany 07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

Sources: BNP Paribas Economic Research, Oxford Economics, OECD. 15

EMPLOYMENT OUTLOOK THE

IMPACT

OF

COVID-19

ON

EMPLOYMENT

Spain

Italy

France

Poland

Persistently high uncertainty is likely to lead to higher household savings and discourage investment. Some sectors, such as tourism and other recreational activities, will be particularly penalised, as consumers will probably remain wary of crowded public places.

•

Additionally, while bold, the policy measures undertaken to ‘freeze’ the economy have limits. They slow down and reduce the impact of the shock on household and business finances but will not fully prevent losses. The staggered nature of policy creates potential ‘cliff edge’ effects on activity and employment.

Uncertain future support amid lower revenues might also weigh on sentiment. Despite the support, some corporates will probably go out of business and the unemployment rate will rise sharply.

•

We have reviewed our scenario for the next 2 years. The major job protection measures put in place by governments had a positive effect on the overall unemployment rate for 2020.

However, as the economic shock seems now to be longer than expected, we are still anticipating an increase in unemployment rates over 2021.

•

The employment outlook will be a key variable in the coming months, as consumption will depend on household psychology. A depressed labour market may imply a boost to precautionary savings.

Covid-19 crisis

Expected employment growth in 2020 and 2021 0%

•

2008 crisis Germany

United Kingdom

-2% -4% -6% -8% -10% -12%

Unemployment rate (in %) 18 16 14 12 10 8 6 4 2 0

Spain

Italy

France

UK

19

Germany

20

Poland

21

Sources: BNP Paribas Real Estate Research, Eurostat.

16

REAL ESTATE PERSPECTIVES

REAL ESTATE PERSPECTIVES COMMERCIAL REAL ESTATE INVESTMENT MARKETS

C O M M E R C I A L R E A L E S TAT E I N V E S T M E N T Q1 2021 vs Q1 2020 GERMANY

-45%

UNITED

-35%

KINGDOM

FINLAND

0.6

EUROPE – Q1 2021

€43.2bn

NORWAY

1.6

-39%

FRANCE NETHERLANDS

-70%

ITALY

-31%

3.2

-26%

IRELAND

+12%

BELGIUM

-75%

CZECH

0.5

-55%

POLAND

REPUBLIC

LUXEMBOURG

€0.5-1bn

€3-4bn

< €0.5bn

(excludes residential investment)

12.0

NETHERLANDS

1.1 0.5

FRANCE

4.9

10.2

CZECH REP.

SWITZERLAND

AUSTRIA

0.5

0.3

SLOVAKIA

0.1 HUNGARY

0.2

ROMANIA

0.2

SOUTH EAST EUROPE

1.2

0.2

1.3 0.3

0.3

• Q1 2020 is the last pre Covid-19 pandemic period available for comparison on an annual basis.

Investment was still buoyant in Q1 2020 setting a new all-time high for a Q1 with €71bn of investment.

POLAND

GERMANY

ITALY PORTUGAL

€4-10bn

UNITED KINGDOM

BELGIUM

-27%

€1-3bn

0.2

1.4

LUX.

-2%

≥ €10bn

BALTICS

DENMARK IRELAND

SPAIN

-40% vs Q1 2020

SWEDEN

1.4

SPAIN

• Only €43bn were invested in Europe in Q1 2021, which represents a 40% fall vs Q1 2020.

• However, investment is gaining traction and should see improvement in the next quarters as Covid-19 pandemic comes under control in Europe.

1.2

Source : BNP Paribas Real Estate

19

C O M M E R C I A L R E A L E S TAT E I N V E S T M E N T * • Throughout 2020, European countries imposed measures to prevent the pandemic from spreading. Lockdowns and travel restrictions had strong impacts on investment markets throughout Europe.

FINLAND

+8%

EUROPE

-62%

Q1 2021 (RY) Q1 2020 (RY)

+16%

vs SWEDEN

-19%

• Overall over the last 12 months of pandemic, most countries experienced a downturn except for Norway, Romania, Estonia and Latvia.

+1%

+3%

-1%

IRELAND

-61%

-46% UNITED KINGDOM

-30%

-27%

GERMANY

-36%

FRANCE

-44%

PORTUGAL

-69%

-25%

-44%

-17% CZECH REP.

-6%

-46%

LUX.

-54%

-13%

POLAND

-31% BELGIUM

-34%

Q1 2021 5-year avg

+55%

NETHERLANDS

-44%

vs

-34% -23%

BALTICS

DENMARK

• However, the rolling year 34% drop needs perspective as the 12 months preceding the pandemic represented an all-time high of €315bn. Some decrease was inevitable without an extreme event.

• Compared to the pre-pandemic 5 year average, the quarterly total shows a softer decrease of -24%.

-59%

NORWAY

-27%

-55%

AUSTRIA

-52%

-50%

-23% SLOVAKIA

-68%

-73%

HUNGARY

-23%

-23%

SWITZERLAND

+44%

ROMANIA

+22% +29%

+3% ITALY

-51%

-32% SPAIN

-45%

-40%

(excludes residential investment)

-16% GREECE

-5%

+34%

Source : BNP Paribas Real Estate

20

C O M M E R C I A L R E A L E S TAT E I N V E S T M E N T V O L U M E PROPERTY

REMAINS AN ATTRACTIVE ASSET TO

BUY

CRE Investment volume (€ billion) 100 90 80 70 60 51 47

50 40

37 30 26

30 20

GERMANY UNITED KINGDOM ADVISORY 8 COUNTRIES** NORDICS FRANCE

• Volumes remain high, especially compared to 2009, as today’s credit conditions are not tight, and investors don't expect major deflation in prices in most markets for secure assets. Last but not least, cash is there and definitely king over this period.

• Northern Europe suffered the less from the pandemic, while the rest of Europe experienced a moderate downturn compared to the average of the 5 previous years.

10 0 08

09

10

11

12

13

14

15

16

17

18

19

20 21 Advisory 8 (countries): Belgium, Czech Republic, Ireland, Italy, Luxembourg, Netherlands, Poland, Spain.

Source: BNP Paribas Real Estate Research.

21

C A P I TA L M A R K E T O U T L O O K SIZE

OF

DEALS

COMMERCIAL REAL ESTATE INVESTMENT IN EUROPE TOTAL AND >€100M SIZE BAND - VOLUME AND SHARE

Mega deals more impacted by the crisis •

•

•

Mega deals (>€100m) volume in Q1 2020 reached a record figure of €37bn, which represented 51% of the total investment, an unusually big share for a Q1. The mega deals had demonstrated an uptick in activity from mid 2019.

The volume of mega deals dropped from Q2 2020 and only reached €85bn over the last 12 months to Q1 2021. This is 45% down annually from Q1 2020. Most importantly the share of mega deals over the last 12 months is only 41% vs 49% in Q1 2020, which shows the negative impact on this segment from Covid.

Big deals are more complicated and require a longer process before signature. The act of signature is a legal formality to a deal already done. This may explain why at onset the coronavirus outbreak effect on the investment market impacted smaller deals more immediately. The process for small deals is easier to terminate. Yet as the crisis went on, the momentum behind getting big deals operational diminished because of the problems of lockdown.

€bn 350 300 250 200 150 100 50 0

50%

08

31%

09

29%

10

37%

11

35%

12

43%

13

42%

14

46%

15

45%

16

42%

17

43%

18

43%

19

49%

207

TOTAL INVESTMENT

85

>€100M DEALS

41%

20 21

Source: BNP Paribas Real Estate.

22

C A P I TA L M A R K E T O U T L O O K CROSS-BORDER

INVESTMENT

MARKET COMMERCIAL REAL ESTATE INVESTMENT IN EUROPE

•

Foreign investment was damaged by the spread of the outbreak through Europe. In spring 2020, most foreign investors delayed their ongoing deals until Europe was open again. Over the last twelve months, foreign investment plummeted (-40% vs Q1 2020).

•

Within foreign investment, European cross-border investment was less affected (-26% over the last 12 months), which makes sense as geographical proximity favoured this type of business during the lockdowns.

•

•

Investment from other continents was, on the other hand, strongly affected by the crisis. There was American activity during the pandemic, but it was strongly diminished (-52%), with €22bn invested.

Investments from Asia Pacific (-54%) and Middle East (-70%) were also strongly impacted. There was almost no activity from both these regions over Q2 and Q3 2020.

As observed in 2009, reduction in cross-border deals in European markets benefited domestic investment. We observed an increase in the share of domestic investment during the 12 months of pandemic This trend may magnify as lockdowns ease, as local investors are physically closer to the markets and quicker to move on opportunities. When international restrictions ease, the share of foreign investors should gradually increase but it may take time to reach pre-crisis levels.

TOTAL, FOREIGN AND DOMESTIC INVESTMENT

€bn 350 300 250 200 150 100 50 0

207

TOTAL INVESTMENT

108 99

DOMESTIC FOREIGN

08 09 10 11 12 13 14 15 16 17 18 19 20 21 COMMERCIAL REAL ESTATE INVESTMENT IN EUROPE FOREIGN INVESTMENT DETAIL

€bn 90 80 70 60 50 40 30 20 10 0 08

09

10

11

12

13

14

15

16

17

18

19

49

EUROPE

22

AMERICA

9 4

ASIA PACIFIC MIDDLE EAST

20 21

23

PRIME OFFICE YIELDS

• The downward trend in office prime yields, ongoing for several years, has slowed down or halted in most markets.

Q1 2021 vs Q1 2020 BERLIN

-5bp

PARIS

-10bp

AMSTERDAM

+15bp

MADRID

+25bp

MILAN

-10bp

LONDON LUXEMBOURG BRUSSELS

HELSINKI OSLO

3.25 5.25

DUBLIN

4.00

=

WARSAW

+20bp

4.75

2.70

PARIS

TOULOUSE

4.50

3-4%

2.55

FRANKFURT

2.75

3.50

BARCELONA

PRAGUE

4.50

VILNIUS

4.70

WARSAW

AMSTERDAM THE HAGUE

MUNICH

3.80 2.55

LUXEMBOURG

3.50 LYON

MARSEILLE

4.80

BUDAPEST

3.00

VIENNA

4.20

MADRID

5.60

BERLIN

2.65

3.50

LILLE

4.00

3.50

HAMBURG

LONDON

4.15

3.50

6.10

RIGA

COPENHAGEN

4.75

BIRMINGHAM

LISBON

≤ 3%

6.00

EDINBURGH

-15bp

+50bp

3.25

TALLINN

MANCHESTER

4.75

-10bp

PRAGUE

3.25

STOCKHOLM

GLASGOW

=

DUBLIN

• Yields are showing upward movement in some markets. such as Amsterdam, Madrid, Warsaw and Prague.

5.75

3.15

BUCHAREST

7.00

4.30

ROTTERDAM

3.20

MILAN

3.75

BRUSSELS

3.90

ROME

DÜSSELDORF

2.90

2.95

COLOGNE

ATHENS

6.00

3.70

LUXEMBOURG

4-6% >6%

Source : BNP Paribas Real Estate

24

REAL ESTATE PERSPECTIVES OFFICE MARKETS

O F F I C E TA K E - U P I N E U R O P E – 3 - M O N T H P E R I O D 18

MAIN

EUROPEAN

OFFICE

MARKETS*

thousand sqm 12 000 Average: 9,406

10 000 8 000 6 000 4 000

1 627

2 000 0

2012

2013

2014 Q1

2015 Q2

2016

2017 Q3

2018 Q4

2019

2020

Q1/Q1 -24%

2021

Average

Take-up plunges in 2020 • • • •

The office occupier market in Europe is still suffering from the effects of the pandemic following its sharp decrease in 2020.

Around 1.627m sqm was transacted over Q1 in the 18 main European markets. This represents a 24% drop y.o.y, although Q1 2020, which was not subject to Covid-19 restrictions, is important context for this figure.

Quarterly volumes are consequently well below their Q1 10-year average (2.15m sqm).

In contrast to 2020 when almost all markets were effectively closed and take-up universally declined, some markets in Q1 2021 are experiencing increases in occupational activity

Source: BNP Paribas Real Estate Research.

* Berlin, Cologne, Dusseldorf, Frankfurt, Hamburg, Munich, Central Paris, Central London Brussels, Barcelona, Madrid, Dublin, Milan, Rome, Luxembourg, Amsterdam, Warsaw, Prague

26

O F F I C E TA K E - U P I N E U R O P E Q1 2021 vs Q1 2020 CENTRAL

LONDON

EUROPE – 2021 Q1

+3%

BERLIN CENTRAL

-55%

PARIS

-57%

MADRID

-21%

WARSAW

27 markets - 22% vs Q1 2020

-37%

AMSTERDAM

MILAN

1.95M sqm GLASGOW

-21%

DUBLIN

EDINBURGH

+49%

DUBLIN

-96%

LUXEMBOURG

+54%

•

HAMBURG AMSTERDAM

-21%

BRUSSELS

Significant fall in take-up

MANCHESTER

BERLIN DÜSSELDORF COLOGNE

LONDON BRUSSELS PARIS

FRANKFURT LUXEMBOURG

MUNICH LYON

WARSAW

• PRAGUE

Take-up at the end of Q1 2021 in Europe shrank 22% relative to Q1 2020.

However, some markets have experienced growth in volumes. This might be the first signs of recovery in the market.

VIENNA BUDAPEST

MILAN

BUCHAREST

PRAGUE MARSEILLE BARCELONA

Deals in thousand sqm 1,000 500 250

> +5%

LISBON

ROME

MADRID

-5 to +5% < -5% Source: BNP Paribas Real Estate.

27

O F F I C E VA C A N C Y I N E U R O P E Q1 2021 vs Q1 2020 CENTRAL

LONDON

HELSINKI

+110 bp

BERLIN CENTRAL

+270 bp

PARIS

AMSTERDAM MADRID MILAN

LUXEMBOURG

4.1%

DUBLIN

8.3%

+460 bp

7.7%

+60 bp

7.0%

MADRID

9.6%

WARSAW

COPENHAGEN DÜSSELDORF BERLIN

11.4%

9.0%

2.6%

3.4%

LUXEMBOURG

5.6%

MILAN

LYON

10.4%

BARCELONA

•

The overall vacancy rate in Europe stood at 7.0% at the end of Q1 (+130 bps vs. Q1 2020).

•

The slowdown in take-up and the release of second hand buildings, plus completion of new schemes are drivers of vacancy increase.

•

Among the main markets, Dublin saw the sharpest increase (+460 bps)

PRAGUE

-%

FRANKFURT MUNICH

Increase in vacancy

VIENNA

4.6%

9.0% BUDAPEST

BUCHAREST

11.5%

5.6% 7.0%

28 markets +130 bps vs. Q1 2020

VILNIUS

7.1%

9.9%

4.1% 8.1%

PARIS

LISBON

8 -10%

BRUSSELS

7.7%

PRAGUE

> 10%

5.8%

LONDON

7.0%

8.0% 15.2%

AMSTERDAM

9.6%

EUROPE – Q1 2021

TALLINN

RIGA

HAMBURG

-

+60 bp

+70 bp

12.0%

GLASGOW

+140 bp

BRUSSELS

6.0%

7.5%

=

+390 bp

DUBLIN

OLSO

+240 bp

WARSAW

STOCKHOLM

8.9% MARSEILLE ROME

5.0% ATHENS

5 - 8% < 5%

Source : BNP Paribas Real Estate

28

L O C AT I O N S (JANUARY 2021) EUROPE FRANCE

Headquarters 167, quai de la Bataille de Stalingrad 92867 Issy-les-Moulineaux Tel.: +33 1 55 65 20 04

GERMANY

Goetheplatz 4 60311 Frankfurt am Main Tel.: +49 69 29 89 90

UNITED KINGDOM

5 Aldermanbury Square London EC2V 7BP Tel.: +44 20 7338 4000

BELGIUM

Avenue Louise 235 1050 Brussels Tel.: +32 2 290 59 59

SPAIN

ITALY

Piazza Lina Bo Bardi, 3 20124 Milano Tel.: +39 02 58 33 141

LUXEMBOURG

POLAND

MIDDLE EAST / ASIA

PORTUGAL

Emaar Square Building n° 1, 7th Floor P.O. Box 7233, Dubaï Tel.: +971 44 248 277

Atrium Tower Al. Jana Pawła II 25 00-854 Warsaw Tel.: +48 22 653 44 00

C/ Emilio Vargas, 4 28043 Madrid Tel.: +34 91 454 96 00

Kronos building 10, rue Edward-Steichen 2540 Luxembourg Tel.: +352 34 94 84

117-119 Vaci ut.

A building 1138 Budapest Tel.: +36 1 688 4400

Investment Management Tel.: +352 26 06 06

Avenida da República, 90 Piso 1, Fracção 1 1600-206 Lisboa Tel.: +35 1 939 911 125

Antonio Vivaldistraat 54 1083 HP Amsterdam Tel.: +31 20 305 97 20

Pobřežní 620/3 186 00 Prague 8 Tel.: +420 224 835 000

HUNGARY

IRELAND

57 Adelaide Road, Dublin 2 Tel.: +353 1 66 11 233

NETHERLANDS

ALLIANCES

CZECH REPUBLIC

DUBAI

HONG KONG, SAR CHINA 63/F, Two International Finance Centre 8 Finance Street, Central, Hong Kong, SAR China Tel.: +852 2909 8888

SINGAPORE

20 Collyer Quay, #17-04 Singapore 049319 Tel.: +65 681 982 82

AUSTRIA I DENMARK I ESTONIA I FINLAND I GREECE I HUNGARY* I JERSEY I LATVIA I LITHUANIA I NORTHERN IRELAND I NORWAY I PORTUGAL I ROMANIA I SWEDEN I SWITZERLAND I USA * Coverage in Transaction, Valuation & Consulting

30