Real estate

Europe Real Estate Sector Report

Spring 2023

March 23, 2023 | 20 min read

European real estate sector conditions and 12 month outlook

1 Outlook refers to the next 12 months
Source: Principal Real Estate, March 2023

Private equity

The end of a decade-long loose monetary policy, leading to a sharp repricing of debt, has put a strain on commercial property values across all sectors, including office. Since the initial rate hikes by the European Central Bank (ECB) and the Bank of England (BoE) in 2022, office yields have softened by 70bps on average across Europe, leading capital values to drop by up to a fifth in some markets. Meanwhile, European office deal volume declined by -47% compared to the same quarter last year, down to €21.4bn in Q4 2022, as investors were reticent to transact and the spread between sellers’ asking price and buyers’ bid widened. Subdued activity is likely to persist until policymakers’ stance on interest rates stabilises. In our view, this is likely to happen in the second half of 2023 or early 2024.

The occupier market remained more resilient. Despite economic headwinds, both the eurozone and the UK entered the year in a better shape than previously anticipated. Unemployment stood at record low levels in most markets, and we expect it is unlikely to increase significantly, now that a widespread energy crisis has been averted, and business confidence has started to recover. As such, office vacancy rates have only moved up slightly by 50 bps to an average of 8.0% across Europe. This trend was mainly driven by secondary office stock, while demand remained positive for best-in-class buildings in central submarkets, as companies continue to migrate towards modern and sustainable assets to meet ESG regulations and attract talent. In other words, the office sector is diverging, with a shortage of newer buildings in prime locations, and an oversupply of “brown” offices in peripheral areas whose prices will likely continue to fall as substantial capex will be required to bring these up to standard. Occupier preference was also reflected in rental growth, which reached 5.1% for prime offices and a lower 3.7% for secondary business districts in 2022 on an annual basis.

Meanwhile, companies are continuing to gradually tilt hybrid working towards the office space, demanding employees spend less time at home. According to JLL, office attendance in Europe is back to 70-90% of pre-pandemic levels, a much higher share compared to the U.S. where it remains stagnant at around an average of 40-60%.

Public equity

The office sector, on average, performed in line with the broader property sector again in the second half of 2022 and in the first quarter of 2023, but there were some large variations and fluctuations around this mean, with France consistently outperforming and Swiss stocks more robust. Dutch offices suffered from a government proposal to increase the taxation of listed property vehicles.

Daily office occupancy is still well below pre-pandemic levels in London, while in Paris office usage has virtually recovered to pre-pandemic levels. However, substantial bifurcation is apparent with prime buildings in the best locations noticeably stronger than secondary assets and locations in almost all markets, where vacancy rates are typically 5-10% higher than prime. Since both tenants and landlords are placing a higher priority on energy efficiency, newer high-quality assets are favoured while also offering tenants better flexibility and helping to retain staff in a tight labour market. Lower-quality offices risk becoming stranded assets unless owners invest substantial capex to counter the risk of obsolescence and while headline rents have not moved much, incentives are higher.

The listed office sector is trading at a discount to last reported NAV of approximately 30% and typically owns assets at the better end of the quality spectrum, where tenant demand is more resilient. Given the valuation gap between public and private markets and uncertain prospects, more M&A activity seems likely.

Private equity

“Beds and sheds” became a common saying among real estate investors during the global pandemic as a surge in e-commerce and abundant liquidity led to record demand for apartments and warehouses. Both asset classes reached record high volumes in 2021, while cap rates compressed to unprecedented levels. But as often happens in capital markets, meteoric rises may be followed by equally spectacular repricing. Thus, when policymakers began to hike interest rates, the industrial and apartment sectors were most severely impacted, as transaction yields became unsustainable. This trend was nowhere more apparent than in the UK, the largest European industrial market by deal volume, where industrial net initial yields softened by 140bps over the six months to January 2023, and capital values declined by -27% from peak to trough, according to the MSCI UK Property index. Although the majority of repricing has already occurred, industrial yields are likely to edge out a little more over the first half of 2023, especially for secondary industrial assets, which are traditionally less liquid and slower to adjust. In mainland Europe, industrial assets followed a similar pattern, although the price volatility was less pronounced than in the UK, due to differences in valuation methodologies, transparency, and liquidity.

The swift price correction seen in industrial assets may create some opportunities for investors during the second half of 2023, given that the sector’s fundamentals remain strong and occupier demand is set to exceed supply, despite the sluggish economic outlook for the current year. Strong leasing activity pushed vacancy rates to historically low levels across most European markets in 2022. Take up in Italy, for example, totalled roughly 2.8m sqm, an increase of 14% over the previous year, driving vacancy rates down to 1.8%. Considering the country still has one of the lowest e-commerce penetration rates in Europe, we believe it offers a sound investment case. In the Netherlands, vacancy rates are expected to decline further to a record low of 1.2% by the end of 2023, according to CBRE. Limited development pipeline, shortage of available land, and increasing construction costs are some of the main factors restricting the supply of new industrial real estate, which is therefore unlikely to keep up with the rising demand.

Public equity

Industrial underperformed the property index in the second half of 2022, before bouncing back and outperforming in the early part of 2023. The underperformance in 2022 was driven by concerns about higher interest rates and the potential for outsized impacts on low cap rate stocks (industrial high amongst them after strong rental growth over recent years). This saw industrial REITs de-rate heavily in the second half of 2022 when it became apparent that inflation wasn’t transitory and European central banks would be taking strong action to combat high inflation.

There has been some reversal of this early in 2023, as hopes of a soft economic landing/avoiding recession and more dovish comments from central banks have seen real estate perform strongly, with low cap rate sectors outperforming. Industrial demand and rental growth seem to be holding up relatively well so far, albeit there are concerns about slowing rental growth in the UK with elevated occupier costs coming from higher business rates (taxes). Development pipelines have generally been scaled back significantly due to higher build costs and lower yield on cost outlooks making developments less profitable. Market supply generally remains tight and pre-let development is likely to continue. Structural tailwinds look likely to continue; however, a stretched consumer in a continuing cost-of-living crisis may pressurise e-commerce growth and cause slower rental growth than before.

Industrial REITs now trade at approximately a 20% discount to NAV on average, having continued to de-rate over the second half of 2022 from the large premiums they traded at in the beginning of 2022. UK stocks suffered most in the second half of the year sell-down as they have historically had the highest rental growth and compressed to the lowest cap rates. Therefore, with higher interest rates and cap rates now going in reverse, they also saw the most pain.

Private equity

Since the Global Financial Crisis, the flow of capital targeting the European apartment sector has steadily expanded. From a low of around €8bn in 2009 to a peak of €100bn in 2021, investors’ appetite seemed insatiable, driven by a low-interest rate environment and structural undersupply across several markets. The sector continued to defeat gravity until the second half of last year when a surge in base rates and borrowing costs set the conditions for a rapid turn. Transaction volume declined by -78% in Q4 2022 year-on-year and some markets started to appear overvalued. Specifically, those with a larger share of mortgage debt and a prevalence of variable rates were poised to face a steeper correction. Sweden was first in line. Houses and apartments in Stockholm are now selling for -20% and -12% from their respective peak, according to SBAB, a Swedish bank. Elsewhere in Europe, prices have held more steadily, but signs of a slowdown have started to appear. In Germany, residential values have fallen by -2.5% over the last six months and further declines remain likely, although moderate. In France, forecasters are expecting declines between 5-7% in 2023, while in Spain, one of the fastest-rising housing markets last year, prices have plateaued, and new mortgage applications declined by -23% according to the Spanish National Council of Notary.

All told, medium-term structural trends remain supportive for investing in the European residential market, especially after the current re-pricing. Demand fundamentals remain supportive, including positive demographics, restricted development pipeline, high construction costs, and land prices. Additionally, the sharp increase in mortgage costs will deter a growing number of households from purchasing a property, which in turn will sustain the rental sector over the medium term. According to the latest data from Eurostat, the statistical arm of the European Commission, 30% of the European population lived in rented accommodations in 2021, with significant differences across countries. Of all tenants, almost 70% were living in a dwelling with a market rent, while the remaining benefited from free or reduced rent levels. Going forward, the share of tenants is expected to increase further amid socio- economic factors including affordability, late marriage, single-person households, and growing mobility. Therefore, we believe the emerging segments of the residential sector, including built-to-rent, co-living, and senior living, offer a solid investment opportunity

Public equity

The European housing sector continued underperforming over the second half of 2022 and year-to-date in 2023 (apart from a short, sharp rally around year-end), hurt by rapidly rising bond yields, while rental growth lagged severely behind inflation and property values softened. Although historically over the longer-term residential rents have been a good inflation hedge, the backward-looking multi-year periods used to calculate the rent indices for regulated housing in markets, such as Germany, mean that it will be some time before in-place rental growth catches up with or overtakes inflation again.

The cost of refinancing maturing bonds rose dramatically as higher real yields and credit spreads in the corporate bond market pushed up refinancing costs, squeezing the margin between property yields and finance costs. While mortgage finance from banks remains readily available, costs are also sharply higher.

Higher energy and construction costs also hurt the housing sector, because in those markets (like the Nordics) where heating costs are included in the rent, margins suffered from higher energy costs. In markets where energy costs are paid by tenants, reduced disposable incomes have decreased housing affordability.

Given the positive reversionary potential, strong demand, and limited supply of affordable housing in most markets, rents should continue growing, but the outlook for values remains uncertain and in Sweden values have already fallen more than 15%. Higher base rates and credit spreads, along with most large companies looking to reduce debt through portfolio sales, has many investors worried that the current low cap rates are unsustainable, and low transaction volumes reinforce this perception of fragility. The sector has derated sharply as companies moved from acquisitive growth to deleveraging, with the sector now trading at an average discount of approximately 48% to last published NAV.

Private equity

In contrast to the industrial and residential sectors that boomed during the pandemic and slowed sharply in recent months, the hotel industry sustained strong growth in 2022 and its outlook continues to improve, driven by the effective ending of travel restrictions, two years of freed pent-up demand, and a favourable exchange rate.

From a capital markets perspective, despite rising rates and borrowing costs, transaction volume increased in Q4 2022 compared to the previous three quarters of the year, although it remained below the sector’s long-term quarterly average of roughly €5bn. Deal activity was boosted by a large portfolio deal in Portugal, which included 18 hotels predominantly located in the Algarve region. On the occupier side, most of the European hotel markets returned to pre- pandemic revenue levels, as measured by RevPAR, the industry benchmark tracking top-line financial performance. Operators took advantage of strong demand levels to hike prices, with the average daily room rate (ADR) increasing above inflation in most markets. Occupancy still offers significant margins for improvement, and we expect it to increase now that travel has resumed its long-term growth trajectory and European airports and airlines anticipate a record flight volume for summer 2023, according to ACI World, an airport trade group.

However, while the medium-term outlook for the hospitality industry is promising, the steady increase in interest rates, borrowing costs, utility expenses, and staff wages is likely to put pressure on operating margins, particularly for less well-capitalised, smaller, and independent owners—a category of hoteliers accounting for a large share of the European accommodation sector. Against this backdrop, we believe interesting opportunities will arise over the next 12-18 months. A significant portion of the market that has historically been difficult to penetrate could become available for hotel investors capable of repositioning and turning around undermanaged assets.

Public equity

Hotels are a relatively small listed sector in Europe, with only one index play available, while other non-index plays are mostly through asset-light operators. The sector has outperformed the broader property index in the second half of 2022 and YTD 2023, as strong pent-up demand post-COVID lockdowns continued to play out with continued improvements in business travel and a gradual return of group travel (albeit in early stages). As inflation continued to surge in the second half of 2022, hotels were seen as a good inflation hedge due to the ability to re-price rooms daily, unlike other property types. We now appear to be past the inflation peak creating renewed hopes this will ease the pressure on hotel cost bases. Cost of living concerns have largely been shrugged off, assisted early in 2023 by renewed hopes of a soft economic landing in Europe and avoiding a recession, which has seen the sector continue to outperform early in the new year. Recovery is still very much rate-driven, with occupancy still lagging and Ukrainian refugees taking up a significant portion of rooms in some locations, reducing supply.

Hotel NAV estimates are slowly paring back again in the new higher interest rate environment, but look to be more resilient that other property types which can’t pass through inflation increases as efficiently. In 2022, asset-heavy hotel stocks traded at an approximate 30% discount to consensus NAV, reflecting concerns over cap rate expansion and continued uncertainty over central bank policy, despite broadly positive operating fundamentals. Asset-light players have generally performed in line with the sector’s average as well.

Private equity

“Blessed are the last for they shall be first” states the gospel to hearten those who didn’t enjoy earthly pleasures. That saying may also apply to the neglected retail sector, which returned to vogue lately after years of weaker performance compared to the other property types. Retail proved to be the most resilient sector by investment volume in 2022, as it increased by 8% to €40bn over the year prior, while all the other sectors (excluding student accommodation) recorded double-digit declines ranging from -10% (offices) to -40% (apartments) over the same period. This outperformance can partially be explained by a low base effect and higher starting yields, which had already decompressed during the highs of the pandemic, and now hover around 5.9% on average. Additionally, prospects for the retail sector were also lifted after the risk of a disruptive energy crisis was averted and the economy closed the year beating analysts’ expectations. However, although European output and consumer spending have been stronger so far than previously anticipated, in our view, 2023 will still be a difficult year as central banks continue to apply the brakes and the full impact of higher interest rates gradually passes through to the rest of the economy, a process which can take up to 18 months. According to the Centre for Retail Research, a British information provider, a total of 15,000 retail job cuts have been announced in the UK since the start of the year as large retail chains, defined as those with ten or more stores, are carrying out cost-cutting programmes and restructuring operations, including clothing retailer New Look and supermarkets such as Tesco and Asda. Meanwhile in mainland Europe, German online fashion retailer Zalando announced in February plans to axe hundreds of jobs to help it confront a “more challenging” economic environment.

Public equity

Retail REITs have outperformed over the second half of 2022 and so far in 2023, despite inflation hitting multi-decade highs eroding consumer confidence and real disposable incomes, with the sector benefiting from investors’ renewed appetite for value stocks. With markets still driven mainly by high inflation and tighter monetary policy, retail property has benefited from its higher starting yield and low investor expectations at the start of the year. After the extreme stress of COVID-related closures and rent holidays, rent collections and vacancies have now normalised for the listed sector after suffering steep falls in previous years. While typical footfall has recovered to around 15-20% below pre-COVID levels, tenant sales are typically now above pre-COVID levels as basket sizes have expanded to compensate (although after adjusting for inflation, volumes are often still lower). After surviving the stress test of the COVID shutdowns, partly thanks to generous rent concessions from landlords, almost all surviving tenants are honouring rent indexation agreements despite inflation spiking, helping retail rents recover rapidly.

Retail REITs still trade at large discounts to NAV, at an average of around 35% below last published NAVs. While there is now less concern about retail REIT balance sheets, most retail REITs continue to deleverage by selling assets and paying down debt. The return of liquidity in pockets of the market has allowed most companies to show progress in this direction, with uncertainty still high regarding the size and price level for the largest regional malls, where only the biggest investors compete and there are still some over-leveraged sellers. Retail property owners continue repurposing excess space for alternative uses where this makes economic sense.

Private equity

The European data centre sector saw muted investment activity for leased assets in Q4 2022 as price expectations between buyers and vendors diverged. The mismatch in the bid-ask spread was largely due to economic headwinds causing fluctuations in the cost of debt and ongoing macro- economic uncertainty. As such, yields for leased data centres softened to levels above those experienced in recent years. Nevertheless, sector fundamentals remain strong as positive structural dynamics, including cloud and AI adoption, continue to drive demand from investors to enter the sector, and for operators to expand their networks.

Occupier demand reached the second-best year on record for colocation take-up in Europe in 2022, equal to 698MW. In Tier 1 markets, which accounted for 56% of the total demand, the level of take-up exceeded new supply in the last quarter of the year, a clear sign of supply-demand imbalance, pushing vacancy rates down by almost four percentage points according to CBRE.

Demand from edge data centres, a crucial infrastructure for the rollout of 5G technology, continues to expand across Europe, with many operators seeking to gain exposure in new Tier 2 markets. Berlin, Milan, Madrid, Zurich, and other secondary markets will benefit from the geographical spread of data centres, and should achieve significant growth in the medium term, also increasing the volume of investment products available. New data centres and subsea cables are being installed in the Nordic countries as well. The region is set to become an important data centre hub as the abundance of renewable energy lures those hyperscalers and colocation operators seeking to decarbonise their businesses. Google, for example, acquired large plots of land in Sweden and Denmark in 2021, and in Finland in 2022, where it plans to expand its existing sea-cooled data centre facility. According to Altman Solon, a consultancy, demand for data centres in the Nordic region is set to grow by 17% CAGR over the next seven years.

European healthcare investment volume reached roughly €12bn in 2022, down 6% from the record level seen in 2021. The decline was less pronounced compared to the traditional real estate sectors since healthcare is perceived as a defensive and counter-cyclical property type offering stable income regardless of the economic outlook.

The care home segment accounted for nearly half of the total volume, or €5bn. Although the amount was -30% below the year prior, it is still triple the average seen before the pandemic as investors remain keen to penetrate the sector, attracted by multiple long- term structural drivers. One of these—perhaps the most obvious—is that the European population above 65 years old is projected to increase by 20% within the next 10 years. Age expectancy has increased, meaning chronic diseases will rise as well. In the UK, for example, the Alzheimer’s Society forecasts that the number of people with dementia in the country will increase by 70% by 2040, up to 1.6 million.

All said, the care home market is still fragmented and dominated by small independent operators, offering a fertile territory for investors to increasingly institutionalise the space and secure the provision of better-quality care services. From this perspective, the current year may offer an interesting window of opportunity as the economics of the sector have shifted and operators are facing multiple challenges including wage inflation, staff shortages, high energy bills, and lending costs. In our view, this could lead to a number of not-for-profit operators in poor financial condition selling out to private operators, who are expected to gain market share in the medium term. Additionally, larger private operators may decide to release capital and raise finances through sale and leaseback agreements. One of the largest European listed operators has recently announced the intention to sell assets worth more than €1bn.

Student Housing sector rating by category

A large series of portfolio deals propelled the student housing sector to a new record high despite the macroeconomic headwinds. Transaction volumes reached €15.5bn in 2022, almost double the amount of the year prior and 60% above the previous historic high of 2019. This upward trend, in our view, is set to continue, as the sector benefits from supply-demand imbalance and very low institutional penetration in several geographies across the continent.

The UK, Europe’s largest student housing market with roughly two-thirds of the total volume, saw a spike in deal activity in the last quarter of 2022, while all other property types recorded sharp declines. Although the performance was boosted by a large portfolio deal, this is still evidence that investors found comfort in the counter-cyclical nature of the sector (student numbers tend to increase during economic downturns), and its short-term price dynamic linked to the academic calendar. In mainland Europe, the stock of purpose-built student accommodation is still small, therefore most of the investment opportunities may lie in the creation of it.

According to Savills, the average provision rate across European cities, defined as student-to-bed ratio, stands at 13%, ranging less than 5% in Italy to 20% in Denmark and Sweden. But in addition to the undersupply, it must be noted most of the existing stock is also dated and not suitable to meet the needs of a growing population of mobile international students. Nevertheless, with an occupancy rate averaging 98% across Europe and a development pipeline which lags the projected increases in students’ number, this asset class is posed to continue to benefit from positive rental growth and capital value returns over the medium term. No wonder institutional investor capital is shifting towards it.

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Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. Real estate investment options are subject to some risks inherent in real estate and real estate investment trusts (REITs), such as risks associated with credit, liquidity, interest rate fluctuation, adverse general and local economic conditions, and decreases in real estate values and occupancy rates. Equity markets are subject to many factors, including economic conditions, government regulations, market sentiment, local and international political events, and environmental and technological issues that may impact return and volatility. Direct investments in real estate are highly illiquid and subject to industry or economic cycles resulting in downturns in demand. Accordingly, there can be no assurance that investments in real estate will be able to be sold in a timely manner and/or on favorable terms.

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Principal Global Investors, LLC, the issuer of this website, does not hold a Singapore Capital Markets Services licence or any Securities and Futures Commission licences in Hong Kong. This website contains general information only on investment matters and nothing in this website is intended to constitute an offer or inducement to provide capital markets products and services to Singapore investors or any investment services to Hong Kong investors.

The information in the following website should not be construed as investment advice or a recommendation for the purchase or sale of any security. The value of investments and the income from them may fall as well as rise. Principal Global Investors, LLC and the other member firms of Principal Global Investors (collectively, the “Firms”)* do not guarantee any investment results and there can be no assurance that the strategies employed will improve investment performance, and make no guarantee that a client’s investment objectives will be achieved and no warranties or representations, expressed or implied, are made by the Firms concerning the benefits of these strategies discussed herein. The information in this website has been developed internally and/or obtained from sources that the Firms believe to be reliable; however, the Firms do not guarantee the accuracy, adequacy or completeness of such information and are not responsible for any errors or omissions. This website also contains videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information.

It contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such nor should it be construed as specific investment advice, an opinion or recommendation. Products and services mentioned in this website may or may not be registered in your jurisdiction for retail distribution or suitable for all types of investors. The general information it contains does not take account of any investor›s investment objectives, particular needs or financial situation, nor should it be relied upon in any way as a forecast or guarantee of future events regarding investment or the markets in general. All expressions of opinion and prediction in this website are subject to change without notice. Any reference to a specific investment or security does not constitute a recommendation to buy, sell, or hold such investment or security.

Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision. You should consider whether an investment fits your investment objectives, particular needs and financial situation before making any investment decision.

Access to this website and its content is only permitted for “institutional investors” in Singapore within the meaning given to that term in section 4A of the Securities and Futures Act 2001 (“Act”) or “Professional Investors” in Hong Kong within the meaning given to that term under the Securities and Futures Ordinance. It is not intended for any retail investors.

The website may contain information on funds that are registered as restricted schemes under the Sixth Schedule to the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations in Singapore. The offer, holding and subsequent transfer of shares are subject to restrictions and conditions stipulated under the Act and the units in those funds are not allowed to be offered to the retail public. The shares of these funds are being offered only on the basis of the information contained in the relevant Information Memorandum. The Information Memorandum is not a prospectus as defined in the Act and accordingly, statutory liability under the Act in relation to the content of prospectuses does not apply. The Monetary Authority of Singapore has not, in any way, considered the investment merits of the funds and assumes no responsibility for the contents of the website and/or that of the Information Memorandum.

It is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction. If you are not an “institutional investor” in Singapore or a “Professional Investor” in Hong Kong you may not access this website and you should select the “I Do Not Accept” button below.

By selecting the “Accept” button below, and entering this website, you are representing and warranting that the applicable laws and regulations of your jurisdiction allow you to access the website and that you have agreed to these terms and confirm and represent that you are an “institutional investor” in Singapore or a “Professional Investor” in Hong Kong."

Principal Global Investors (Australia) Ltd. (ABN 45 102 488 068, AFS Licence No. 225385) ("we", "us", "our") is regulated by the Australian Securities and Investments Commission.

The information in this website, and on pages linked by this website, is general information only and is not intended to constitute financial product advice or a recommendation to buy, sell or hold any particular security or investment. It does not take into account any investor's investment objectives, particular needs or financial situation. Any investor should consider whether an investment fits their investment objectives, particular needs and financial situation before making any investment decision.

While the information on this website is updated from time to time, it is subject to change in the intervening period. None of Principal Global Investors (Australia) Limited or its related entities (together "Principal") guarantee the accuracy, completeness or timeliness of the information on this website. Information may become outdated and opinions may change, including as a result of new information becoming available or changes in the markets. To the extent permitted by law, Principal does not accept any responsibility arising in any way (including by reason of negligence) for errors in, or omissions from, this information.

We offer financial products only to wholesale investors (as defined in sections 761G and 761GA of the Corporations Act) and to persons investing through an investor directed portfolio service under the product disclosure statements that can be accessed from this website.

The information contained in this website is intended only for Australian residents and investors and is not intended for use in any country or jurisdiction where such use would constitute a violation of law. There is no intention to offer or sell products in countries or jurisdictions where such offer or sale would be unlawful under the relevant domestic law.

Protecting Your Privacy

At Principal Global Investors (Australia) Ltd, we give priority to protecting the privacy of your personal information. We do this by handling personal information in a responsible manner and in accordance with the Privacy Act 1988 (Cth).

If it is reasonable and practicable to do so, we collect personal information directly from you. How we collect your information will depend upon how you interact with us. We may collect it through application forms, telephone, email and internet contact, from correspondence with you or your consultant and in person.

The information collected may include what time you visited our website, how long you were on our site, if you've been to the site before, what web pages you visited, and what type of browser you used to access our website. This information is collected through the use of cookies.

Use of cookies on this site is outlined in the Principal Online Privacy Policies, Information Collected by Use of Cookies and Spotlight Tags. In accepting these terms and conditions, you accept the terms of the use of cookies from this site. You can configure your browser to accept all cookies, reject all cookies, or notify you when a cookie is sent. Refer to your browser instructions or help screens to learn about these functions. If you reject all cookies, you may not be able to use our web sites.

We may collect, hold and use personal information in order to process applications, administer the investments and provide related services. If you do not provide your personal information to us, we may not be able to process and administer your investment. We may also use your personal information to tell you about other products and services offered by us or other members of the Principal Financial Group. Please contact us if you do not wish to receive this ongoing information.

We may disclose your personal information to other related companies within the Principal Financial Group®, agents and other external service providers (who supply administrative, financial or other services), some of which are located overseas. Where this occurs, we take steps to protect personal information against misuse or loss however you should be aware that in the event the overseas recipient fails to handle the personal information consistently with the Australian Privacy Principles, we will not be accountable under the Privacy Act and you will not be able to seek redress under the Act. The countries this information may be disclosed to will vary from time to time, but may include Brazil, Chile, China, Hong Kong, India, Japan, Malaysia, Singapore, the United Kingdom and the United States and other countries where the Principal Financial Group® has a presence. A list of locations in which the Principal Financial Group® operates can be found at https://www.principal.com/about-us/our-company/company-overview/worldwide-locations. Our Privacy Policy contains information about how you can gain access to the personal information that we hold about you and seek correction of that information, subject to certain exemptions under law. Our Privacy Policy also contains information about how you may raise concerns regarding privacy with us and how we will deal with your concerns.

You can obtain a copy of our Privacy Policy by clicking on the link below:

Privacy at Principal Global Investors (Australia) Limited

By clicking "Accept", you consent to us dealing with your personal information in the manner set out in our Privacy Policy. You also acknowledge and understand that by providing such consent that we will not be required to take such steps as are reasonable in the circumstances to ensure overseas recipients of your personal information comply with the Australian Privacy Principles.

"Principal Financial Group is a global organization that operates in many different jurisdictions worldwide. Principal Financial Group’s diversified group of companies and affiliates provide comprehensive asset management solutions for institutional investors, investment funds and individuals in key markets around the world. Principal Financial Group has investment offices in the United States, [Mexico, South America, Europe, the Middle East, and throughout Asia]. Where appropriate, Principal Financial Group entities are registered with appropriate regulatory authorities in the jurisdictions in which they are required to be registered to carry on their respective business activities.

All products or services provided to you by any Principal Financial Group company shall only be available in the jurisdiction(s) within which the company providing the product or service is authorized to operate. The relevant Principal Financial Group company reserves the right to make the final determination on whether or not you are eligible for any particular product or service. If you choose to enter a website outside your country of residence, you are advised that it may not be legal in that jurisdiction for you to access or use the facilities available on that Site and the legal requirements of that jurisdiction may prohibit you from dealing or otherwise transacting in that jurisdiction.

Principal Financial Group makes no representation that the content of the site is appropriate for use in all locations, or that the transactions, securities, products, instruments or services discussed at this site are available or appropriate for sale or use in all jurisdictions or countries, or by all persons and entities. Nothing on this website shall be considered a solicitation for the offering of any investment product or service to any person in any jurisdiction where such solicitation or offering may not lawfully be made.

You may view, download for caching purposes only, and print content from the website for your own personal use, subject to the restrictions set out below and elsewhere in these Terms of Use.

No Guarantee of Timeliness
This website may contain videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions. The information and materials contained on this website, and the terms, conditions, and descriptions that appear, are subject to change. All content on this website is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. In addition, you are responsible for setting the cache settings on your browser to ensure you are receiving the most recent data.

No Warranties
The information on this website has been developed internally and/or obtained from sources believed to be reliable; however Principal Global Investors and its affiliates do not independently verify or guarantee its accuracy or validity. The information and services provided on this website are provided ""AS IS"" and without warranties of any kind, either expressed or implied. To the fullest extent permissible pursuant to applicable law, Principal Global Investors disclaims all warranties, including, but not limited to, any warranty of non-infringement of third-party rights and any implied warranties of merchantability and fitness for a particular purpose. Principal Global Investors does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained on this website and does not warrant that the functions contained in this website will be uninterrupted or error-free, that defects will be corrected, or that the website will be free of viruses or other harmful components. Principal Global Investors expressly disclaims all liability for errors and omissions in the materials on this website and for the use or interpretation by others of information contained on the website. Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions on this website.

If you have questions, please email us.

Click ""Accept"" to indicate your acknowledgement and acceptance of Principal Global Investors Terms of Use and to continue."

"These Terms & Conditions explain certain legal and regulatory conditions and restrictions in relation to the Principal Global Investors (Europe) Limited website, and in relation to the Principal Global Investors Funds (‘the Funds’). This information may be changed by Principal Global Investors at any time without notice.

In these terms and conditions, references to 'Principal Global Investors' means Principal Global Investors (Europe) Limited or any affiliate of the Principal Financial Group, Inc. or Principal Global Investors, LLC.

Before you proceed, you must acknowledge that you have read, and agree to, our terms and conditions.

Information in relation to the Principal Global Investors Funds is available through this web site to institutional investors resident in the following countries of: Belgium, France, Finland, Germany, Guernsey, Ireland, Italy, Jersey, Netherlands, Spain, Sweden, Switzerland and the United Kingdom. By proceeding this far you are representing and warranting that you are an institutional investor resident in one of these countries. Not all of the Funds are available in all these jurisdictions, and investors are directed to the Country Registration document for detailed information . What follows is not an offer or invitation to acquire an investment to, and should therefore not be relied upon by, any person anywhere other than the countries noted. Persons in respect of whom such prohibitions apply must not access this web site. This web site is reserved exclusively for non-U.S. persons and should not be accessed by any person in the United States.

Yes, I certify to be an institutional investor and resident of a country listed above.

Cookies
Use of cookies on this site is outlined in the Privacy and Security Policy. In accepting these terms and conditions, you accept the terms of the Cookie Policy and the use of cookies from this site.

Legal Entity Disclosure and Regulation
In Europe by Principal Global Investors (EU) Limited, Sobo Works, Windmill Lane, Dublin D02 K156, Ireland. Principal Global Investors (EU) Limited is regulated by the Central Bank of Ireland.

In the United Kingdom by Principal Global Investors (Europe) Limited, Level 1, 1 Wood Street, London, EC2V 7 JB, registered in England, No. 03819986, which is authorised and regulated by the Financial Conduct Authority (“FCA”).

In Switzerland by Principal Global Investors (Switzerland) GmbH. This website is considered as advertising and information contained herewith be treated as such. Investors can obtain free of charge the prospectus, trust deed, the prospectus, the key investor information document (KIID), and the annual and semi-annual reports from the representative in Switzerland.

In Europe and United Kingdom, this website is directed exclusively at Professional Clients and Eligible Counterparties and should not be relied upon by Retail Clients (all as defined by the MiFID and FCA respectively). If you are viewing the material as a retail investor, you should seek independent investment advice before deciding whether the products and services in question are suitable to meet your investment needs and objectives, as the language has not been complied to a retail client standard.

Principal Global Investors Funds
Principal Global Investors (Ireland) Limited is the issuer of the Funds. Investments may only be made on an application form attached to a current prospectus and following receipt by the investor of the KIID in respect of the Fund in which they intend to invest. The latest version of the prospectus of the Funds is dated 14 December 2012.

For Real estate investors in the European Economic Area (“EEA”), this website and the information on it is only directed at persons who are professional investors for the purposes of the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”), professional clients or eligible counterparties for the purposes of the Markets in Financial Instruments Directive (Directive 2014/65/EU) (“MiFID II”) or as otherwise defined under applicable local law and regulation and at whom this website and the information on it may lawfully be directed in any relevant jurisdiction (“Eligible Persons”). In relation to each member state of the EEA (“Member State”) which has implemented AIFMD (and for which transitional arrangements are not/ no longer available), this website may only be accessed and interests in Funds may only be offered or placed in a Member State to the extent that: (i) the relevant Fund is permitted to be marketed to professional investors in the relevant Member State in accordance with AIFMD (as implemented into the local law/regulation of the relevant Member State); or (ii) this website and its information may otherwise be lawfully distributed and the interests in Funds may otherwise be lawfully offered or placed in that Member State (including at the initiative of the investor). In relation to each Member State of the EEA which, at the date of accessing this website, has not implemented AIFMD, this information may only be distributed and interests in Funds may only be offered or placed to the extent that this information may be lawfully distributed and the interests in Funds may lawfully be offered or placed in that Member State (including at the initiative of the investor).

Persons who are not Eligible Persons, including but not limited to those individuals or other persons who fall within the FCA’s definition of ‘retail clients’, should not use or rely upon this website or the information contained therein and may not engage the services of Principal Real Estate or any of its affiliates, or invest in any Fund. Potential investors are advised that all or most of the protections provided by the UK regulatory system will not apply and that the UK Financial Services Compensation Scheme may not be available in relation to an investment in a Fund or separate account.

The contents of this website have not been verified or approved by any competent regulatory or supervisory authority. No liability, whether in negligence or otherwise, arising directly or indirectly from the use of the information or any part of it on this website is accepted and no representation, warranty or undertaking, whether express or implied, is or will be made at any time by Principal Real Estate or its affiliates or any of their respective advisers, directors, officers, employees, representatives or other agents (“Principal Agents”) for any information or any of the opinions contained herein or for any errors, omissions or misstatements.

None of Principal Real Estate or its affiliates or any Principal Agents makes or has been authorised to make any representation or warranties, whether express or implied, in relation to Principal Real Estate or regarding the truth, accuracy or completeness of any of the information contained on this website at any time. No representation or warranty is given by Principal Real Estate, its affiliates or the Principal Agents as to the achievement or reasonableness of, and no reliance should be placed on any projections, targets, estimates or forecasts contained in the information on this website. Furthermore, nothing contained on this website is or should be relied on as a promise or representation as to the future. No reliance may be placed by any person for any purpose whatsoever on the information or opinions contained on this website or on its completeness, accuracy or fairness at any time.

Principal Global Investors (Europe) Limited is not authorised by the FCA to directly deal with retail investors; any distribution of the Fund to retail investors in Europe is facilitated by fund distributors with which Principal Global Investors (Europe) Limited has entered distribution arrangements, pursuant to advice provided to investors by those distributors, based on the documents Principal Global Investors (Europe) Limited provides. Retail investors should not be provided with access to this website.

The name of the Swiss representative is ACOLIN Fund Services AG, Stadelhoferstrasse 18, CH-8001 Zürich. The name of the Swiss paying agent is Banque Cantonale de Genève, 17, quai de l’Ile, 1204 Geneva. Investors can obtain the prospectus, trust deed, the simplified prospectuses and the annual and semi-annual reports free of charge from the representative in Switzerland.
The value of units and the income from them may fall as well as rise.

Investments in the Funds are neither insured nor guaranteed by the US Government or the Federal Deposit Insurance Corporation and are not deposits or obligations of, or guaranteed by, Principal Global Investors.

No Solicitation
Nothing contained in this website shall constitute an offer or solicitation, in relation to units in the Funds or generally, in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised.

In particular, shares issued by the Company, and units in the Funds, have not been and will not be registered under the United States Securities Act of 1933 as amended or the securities laws of any state or political subdivision of the United States and may not, except in a transaction which does not violate US securities laws, be directly offered or sold in the United States or to any US Person. The Company will not be registered under the United States Investment Company Act of 1940 as amended.

This website is reserved exclusively for non-US persons and should not be accessed by any person in the United States.

No Investment Advice
The information in this website contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such nor should it be construed as specific investment advice, an opinion or recommendation. The general information it contains does not take account of any investor’s investment objectives, particular needs or financial situation, nor should it be relied upon in any way as a forecast or guarantee of future events regarding a particular investment or the markets in general. Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision.

You should also inform yourself as to (a) the possible tax consequences, (b) the legal requirements and (c) any foreign exchange restrictions or exchange control requirements which you might encounter under the laws of the countries of your citizenship, residence or domicile and which might be relevant to any investment, including the subscription, holding, transfer or disposal of units in the Funds

Delegation of Investment Management to Affiliates

Products upon which composite results contained in this material, if any, are based may not themselves be available in the United Kingdom and certain other jurisdictions; however, the underlying investment management capability can be made available to institutional investors subject to all applicable local regulations and restrictions. In connection with its management of client portfolios, PGIE may delegate management authority to affiliates that are not authorised and regulated by the Financial Conduct Authority. In any such case, the client may not benefit from all protections afforded by rules and regulations enacted under the Financial Services and Markets Act 2000.

Disclaimer
The information on this website is given by Principal Global Investors in good faith and has been derived from sources believed to be reliable and accurate as at their date. However, Principal Global Investors makes no representation or warranty of any kind for the accuracy or completeness of the information and it is under no obligation to update or correct any errors in the information after the date of publication. This website also contains videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions.

Subject to applicable law, Principal Global Investors and its affiliates and their respective directors, employees and associates do not accept any responsibility arising in any way (including by reason of negligence) for errors in, or omissions from, the information and do not accept any liability for any loss or damage, however caused, as a result of any person relying on any information on the website or being unable to access the website.

The Internet is not a totally reliable and secure medium of communication. Principal Global Investors accepts no liability for the security or confidentiality of information transmitted in this way and any such transmission of information shall be at your own risk.

The entire content of this website is subject to copyright with all rights reserved. You may not copy, reproduce, distribute or modify the content of this website without the prior written permission of Principal Global Investors.

No instructions for investment purposes will be accepted directly from this website or by e-mail.

If you accept these terms and conditions, click ""Accept."""

You are about to leave PrincipalAM.com and be directed to our Japanese site, PrincipalGlobal.jp. If you wish to proceed, please click "Accept." If you would like to stay on PrincipalAM.com, please click "I do not accept."

You may view, download for caching purposes only, and print content from the website for your own personal use, subject to the restrictions set out below and elsewhere in these Terms of Use.

No Guarantee of Timeliness
This website may contain videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions. The information and materials contained on this website, and the terms, conditions, and descriptions that appear, are subject to change. All content on this website is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. In addition, you are responsible for setting the cache settings on your browser to ensure you are receiving the most recent data.

No Warranties
The information on this website has been developed internally and/or obtained from sources believed to be reliable; however Principal Global Investors and its affiliates do not independently verify or guarantee its accuracy or validity. The information and services provided on this website are provided ""AS IS"" and without warranties of any kind, either expressed or implied. To the fullest extent permissible pursuant to applicable law, Principal Global Investors disclaims all warranties, including, but not limited to, any warranty of non-infringement of third-party rights and any implied warranties of merchantability and fitness for a particular purpose. Principal Global Investors does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained on this website and does not warrant that the functions contained in this website will be uninterrupted or error-free, that defects will be corrected, or that the website will be free of viruses or other harmful components. Principal Global Investors expressly disclaims all liability for errors and omissions in the materials on this website and for the use or interpretation by others of information contained on the website. Subject to any contrary provisions of applicable law, no company in the Principal Financial Group nor any of their employees or directors gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way (including by reason of negligence) for errors or omissions on this website.

If you have questions, please email us.

Click ""Accept"" to indicate your acknowledgement and acceptance of Principal Global Investors Terms of Use and to continue."

"Principal Global Investors, LLC, the issuer of this website, is a branch registered in the Dubai International Financial Centre and is authorized by the Dubai Financial Services Authority as a representative office.

This website contains general information only on investment matters and nothing in this website is intended to constitute or form part of any offer or inducement to issue or sell, or any solicitation of any offer to subscribe for or purchase, any securities or investment products in the UAE (including the Dubai International Financial Centre) and accordingly should not be construed as such. Information in this website is not directed at you if we are prohibited by any law of any jurisdiction from making the information on this site available to you and is not intended for any use that would be contrary to local law or regulation. Products or services mentioned on this site are subject to legal and regulatory requirements in applicable jurisdictions and may not be available in all jurisdictions. Accordingly persons are required to inform themselves of and observe any such restrictions.

The information in this website is being made available on the basis that the recipient acknowledges and understands that the entities and securities to which it may relate have not been approved, licensed by or registered with the UAE Central Bank, the Dubai Financial Services Authority or any other relevant licensing authority or governmental agency in the UAE or elsewhere in the Middle East.

The information in the following website should not be construed as investment advice or a recommendation for the purchase or sale of any security. The value of investments and the income from them may fall as well as rise. Principal Global Investors, LLC and the other member firms of Principal Global Investors (collectively, the ""Firms"")* do not guarantee any investment results and there can be no assurance that the strategies employed will improve investment performance, and make no guarantee that a client's investment objectives will be achieved and no warranties or representations, expressed or implied, are made by the Firms concerning the benefits of these strategies discussed herein. The information in this website has been developed internally and/or obtained from sources that the Firms believe to be reliable; however, the Firms do not guarantee the accuracy, adequacy or completeness of such information and are not responsible for any errors or omissions. This website also contains videos where the comments were valid on the date the video was recorded. Markets move continuously and you should only rely on current information for any investment decisions.

This website contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. The information it contains does not take account of any investor's investment objectives, particular needs or financial situation. Past performance is not a reliable indicator of future performance and should not be relied upon as a significant basis for an investment decision. You should consider whether an investment fits your investment objectives, particular needs and financial situation before making any investment decision.

Nothing in this website should be construed as investment, tax, legal or other advice.

The content of this website has not been approved by or filed with the UAE Central Bank or Dubai Financial Services Authority.

Access to this website is only permitted for ""sophisticated institutional investors/professional clients"". If you are not a ""sophisticated institutional investor/professional client"", you may not access this website and you should select the ""Decline"" link below.

By selecting the ""Accept"" button below, and entering this website, you agree to these terms and confirm and represent that you are a "" sophisticated institutional investor/professional client""."