• Investment activity in Q1 2012 was sharply down due to weaker economic activity. The weak outlook and eurozone uncertainty will continue to dominate investment strategies in the near term, with investors following risk averse strategies - favouring stronger economies, non-euro economies and prime property. Capital values are essentially stable at the moment for prime, but are falling for non-prime.
  

• In uncertain economic periods, investors often tilt their asset allocation and portfolio decisions towards defensive assets that are underpinned by well-secured income. 
• This paper, co-authored with Mercer, uses actuarial-style techniques to assess the relative standing of the industrial and logistics sector for institutional investors across four key dimensions: income, inflation-related returns, liability-matching and efficient total returns.
• Industrial and logistics property performs extremely well on the income dimension, and is likely to be a core element for investors seeking inflation-related returns.  The sector also has a role as a complement to bonds for liability-matching purposes, and may offer efficiency advantages to investors prepared to look at sector fundamentals rather than simply adopting index weightings. 
  

• European banks seeking to strengthen their balance sheets will not be shedding significant quantities of real estate assets at depressed prices, as they pursue measured deleveraging strategies.
• The enclosed report analyses the perception amongst many global investors that banks in Europe will (and can) be forced to achieve deleveraging through the bulk sale of property loans and assets at any price.
• In coming to this conclusion, CBRE's report considers: the drivers of banks’ desire to reduce their real estate exposure, the implications of various courses of action, and the actions undertaken by banks since the bottom of the market in 2009.

• Retail property was the best performing commercial real estate sector in Q1 2012
• Overall, capital values across Europe remained broadly stable, registering only a marginal decline of 0.6% on the quarter
• Despite challenging conditions, the relative stability of overall real estate values seems somewhat noteworthy. However, lead indicators do signal that values may only be stable for the most prime assets, with secondary and tertiary seeing falls
  

• European retail investment fell to €4.6 billion in Q1 2012, 64% below Q1 2011 and less than a half of the quarterly average from the last two years of €9.4 billion. 2012 has seen a more cautious start with a lack of large deals closing.
• Activity was weak across all geographies, bringing the retail share of overall European investment to under 20%.
• The persistent gap in buyer and seller expectation when pricing secondary assets is another obstacle to uplift in activity, despite growing number of investors interested in value-add and more secondary assets;

• The commercial property investment market totalled just under €24 billion in the first quarter of 2012 representing a 31% fall in activity compared with the last quarter of 2011 and an 18% fall on Q1 2011
• The Nordic region saw significant growth, with an increase of nearly 50% in activity during Q1 2012 compared with Q1 2011. Government finances in the region are favourable compared with the rest of Europe, as are the prospects for economic growth. 
• Investment slowed in CEE, however investor appetite remains strong for good quality property assets, particularly in core markets such as Poland.

• The CBRE EU-15 Prime Office and Industrial Yield indices continue to edge upwards in Europe, reflecting the currently unfavourable economic picture. Office yields rose primarily in Italy, Spain, and the Netherlands.
• Prime office rents registered slight increases in Germany and Austria, while decreases were recorded in Dublin and some Spanish markets.
• Industrial rents continue to deteriorate leaving the CBRE EU-15 Prime Industrial Rent Index at its cyclical low.
• European retail remains robust as prime rents continue to rise and yields fall, albeit marginally.

• The escalation of the sovereign debt crisis last year, together with signs that this was starting to spread to the European banking system, led many to believe a new credit crunch was imminent. Tensions in the financial markets appear to have eased since then, but prospects for the sector, banks in particular, remain uncertain, and risks of a new relapse exist.
• Clearly, the markets with a stronger concentration of financial services in their occupier base are those likely to be most affected by developments in this sector. London, together with Zurich and Geneva, are the European cities whose economies are most dependent on financial services activity. Dublin, Paris, Frankfurt and Brussels also feature a relatively high concentration of financial services in their local economy.
• In terms of office market activity, the contribution of the banking and finance sector to take-up declined in several markets last year, particularly in London. A still challenging business environment and announced lay-off plans will most likely continue to affect the financial sector’s space requirements for the foreseeable future.
• The prospects for the major European financial centres, and their office markets, equally depend on ongoing and future regulatory changes. In particular, a failure to implement and enforce new regulation/taxation consistently at multilateral level risks penalising those jurisdictions deemed less attractive.

• Low interest rate environments are intended by governments as a way of stimulating economic growth by encouraging business investment. However, those same low interest rates have created a significant barrier to banks working out their legacy of non-performing real estate loans.
• Created as a hedging instrument, swaps were intended to protect real estate loans with high LTVs, which typically have low interest rate cover, against interest rate rises.
• However, as the financial crisis drove interest rates down to unprecedentedly low levels, these instruments have become increasing burdens on investors and, in the case of distressed sales, the recovery of value to lenders.

• If the Euro zone crisis continues with no clear resolution:- Prime property generates a higher income return than bonds and equities, with low development activity helping to maintain occupancy rates and continued income generation.
• If dealing with the sovereign debt crisis results in inflation:- Continental markets benefit from indexation in the short term and in the longer term real estate is a better hedge against inflation than fixed income bonds.
• If the resolution of sovereign debt crisis results in economic recovery:- Occupier demand improves, occupancy rates increase and lack of development results in a shortage of good quality space, increasing income and capital values.
  

• Compelling data can be the key for engaging the business in designing and implementing an AWS. It serves as a catalyst for dialogue and allows for a deep understanding of the "nuts and bolts" of the business. It also plays a key role in demonstrating the value and benefit of an AWS.
• Implementing change is not easy, especially given the diverse range of functions and working practices that are common for organisations in this sector. Executive sponsorship from someone who understands and moreover, believes in the AWS agenda can be crucial to successful adoption of an AWS programme and implemention of change.
• The exporting of "success stories" from countries such as the Netherlands and Australia is adding to the momentum of implementation of AWS programmes in the sector. Rapid technological innovation, labour demands and the continued focus on cutting costs will only serve to increase this drive.
  

·         Russia and Poland enjoyed a mini boom over the Christmas period, and the UK did better than expected.

·         Christmas sales disappointed in France and Germany, with Italy and Spain recording more dramatic declines. In general, consumers in the eurozone area spent less over Christmas than those in other countries.  

·         Luxury retailers posted strong sales figures despite a squeeze on spending, as have many value retailers.

·         Retailer administrations were a feature of the UK market over the Christmas period, but were rare elsewhere.

• Since 2008 London Has Attracted 41% of Property Investment from outside Europe. This current influx of international capital is qualitatively different from previous foreign investment flows into Central London property.
• Sovereign wealth funds and cash-positive pension funds from Asia and the Middle East are becoming increasingly prominent in the market; these investors have particularly long investment horizons
• A number of factors are driving SWF and cash-positive pension fund investment activity at present, namely insufficient domestic investment opportunities forcing capital overseas; diversification from domestic economies; and domestic regulatory change giving the potential for sizeable amounts of capital to flow into the real estate market from the pension fund industry.