Europe's Real Estate Industry in for 'Long, Slow Haul' to Recovery

Emerging Trends Survey Cites Munich, Hamburg, Paris and London as Promising for Investment

LONDON, February 1 - With some credit easing and property values stabilising, Europe's real
estate industry will see some improvement in 2010, but still faces a 'long,
slow haul' to recovery, according to Emerging Trends in Real Estate(R) Europe
2010, published today by the Urban Land Institute (ULI) and
PricewaterhouseCoopers.

The seventh annual report is based on surveys and interviews with well
over 600 of the industry's leading authorities, including investors,
developers, financiers, and property managers. Overwhelmingly, respondents
cite the need to move forward cautiously, as Europe's economy remains fragile
due to high unemployment and low consumer spending.

Additionally, the report notes the looming problem of massive refinancing
of real estate debt totaling hundreds of billions worth of euros. The
industry is apprehensive as it is not clear how this will play out, in terms
of whether financial institutions will sell real estate assets and loans or
"extend and pretend." This challenge for the real estate sector is compounded
by uncertainty over how, and when, European governments might wean their
respective economies off the massive injections of state support. An abrupt
withdrawal of the stimulus funds could derail the recovery, and even push the
economy back into recession, the report notes.

John Forbes, real estate leader in Europe, Middle East and Africa,
PricewaterhouseCoopers, remarked: "This year there is a sense of cautious
optimism. Sentiment regarding investment prospects has stabilised and
although sentiment regarding development continues to decline, it is a less
dramatic fall than that witnessed last year. The key issue is the occupier
side of the equation. Investors are nervous and they are concentrating on the
deeper, more liquid markets."

"Europe's economic recovery is underway, but it will be sluggish and
uneven," said ULI Europe Chairman Alexander Otto. "We are looking at a crawl
back up the hill, and how much values recover will depend on where Europe
ends up economically against global competition." Otto, chief executive
officer of ECE Projektmanagement in Hamburg, Germany, noted that in general,
Germany is viewed more favourably for investment and development activity
than other countries, due primarily to its broad economy. In terms of
individual cities, Munich and Hamburg were ranked by the report as the top
two prospects in 2010 for existing portfolios, a ranking they also held in
2009. "The diverse economic base and even balance between supply and demand
has kept office markets in both cities healthy, making them an appealing
choice for investment," Otto said.

Paris was ranked third by Emerging Trends in terms of prospects for
existing portfolios, edging out London due in part to the general perception
that it has a wider economic base and is less dependent than London on the
financial services sector. Interviewees pointed to the low level of vacancies
in Paris, raising its ratings for investment opportunities and, to a lesser
extent, for development.

Investor sentiment regarding London "improved significantly" from 2009,
due primarily to a market correction led by an infusion of funds from the
Middle East and Asia. The city ranked fourth in 2010 for investment in
existing properties and first for new acquisition opportunities. For
acquisitions, the main focus is offices, with nearly half the respondents
citing that as the preferred asset type. Despite some skepticism over the
limited extent of the rebound, some interviewees indicated that they are
confident enough about London to make development plans for 2011, if not for
this year.

William Kistler, president of ULI EMEAI (Europe, Middle East, Africa and
India) noted that in the current environment, there is a tendency among
investors to focus on markets they know. "Transparency and liquidity attract
investors who would not consider other markets, and this is holding true for
both London and Paris," Kistler said. "These markets have strong interest
from non-European investors. 2010 is all about playing it safe and avoiding
risk."

Additional markets rounding out the "top ten" named by Emerging Trends
for existing property performance prospects are Vienna, Milan, Istanbul,
Berlin, Rome and Frankfurt.

In terms of property types, the quality of the location, building and
tenant is the main consideration, according to the report. Centre city
offices, high-end street retail and shopping centres are the top commercial
investment choices for 2010. Residential investments are also highly rated.
Although mainstream property types are preferred, niche sectors continue to
have some limited appeal, including student housing, self storage, retirement
homes, social housing, healthcare facilities and infrastructure. Green
development of any kind is gaining significance, particularly with the
European Union introducing compulsory energy efficiency ratings for
buildings. "It should become part of the DNA of our businesses," said one
respondent.

Among the top tips from the report's respondents:

    - Keep it simple: Go for "plain vanilla real estate investments that
      everybody understands."
    - Best buys: Core is king. Stick to core and core-plus investments in
      large, liquid markets.
    - Development: For those with the stomach for risk, buy land and start
      building up a pipeline of projects. Residential and mixed-use are the
      best sectors.
    - Go for debt: Buy a bank or set up a lending platform. Now is a great
      time to lend on real estate, if you have the right skill-set and no
      legacy issues. Values are low and "the gap between cost of funds and
      loan margins is as good as it gets". Or, buy distressed debt at a
      discount.
    - Green is good: Real estate is on the front line in the battle against
      climate change. "There is now a clear realisation that environmental
      and social responsibility is connected to economics. It has become an
      action issue."

About the Urban Land Institute

The Urban Land Institute (www.uli.org/) is a global nonprofit
education and research institute supported by its members. Its mission is to
provide leadership in the responsible use of land and in creating and
sustaining thriving communities worldwide. Established in 1936, the Institute
has nearly 33,000 members representing all aspects of land use and development
disciplines.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com/) provides industry-focused
assurance, tax and advisory services to build public trust and enhance value
for our clients and their stakeholders. More than 163,000 people in 151
countries across our network share their thinking, experience and solutions
to develop fresh perspectives and practical advice.

"PricewaterhouseCoopers" refers to the network of member firms of
PricewaterhouseCoopers International Limited, each of which is a separate and
independent legal entity.

Trisha Riggs of Urban Land Institute, +1-202-624-7086, mobile: +1-202-679-4557, priggs at uli.org; or Rebecca Mill of PricewaterhouseCoopers, +44 (0) 20-7213-5829, rebeccaemill at uk.pwc.com / NOTE TO EDITORS: To receive a copy of the report, contact Trisha Riggs of ULI at +1-202-624-7086 or priggs at uli.org.