Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
Slowing net lending to property expected to continue As expected, net lending to property was relatively weak in November in the run up to UK election. Despite a decisive result in the poll, we don’t think there will be much of an improvement in the …
3rd January 2020
Construction ends 2019 on a weak note The headline construction PMI numbers ended 2019 with a whimper, as November’s improvement was reversed. The survey pointed to falling output for most of last year and, despite a post-election easing of uncertainty, …
The election of a Conservative government with a large majority is likely to mean a slightly improved commercial property outlook. While we do not expect a post-election rebound, lower interest rates and a slightly better rental outlook will bring less …
24th December 2019
The marginal increase in rental values in November was not enough to prevent capital values from falling on an annual basis. Indeed, the impact of rising yields, particularly in the retail sector, caused all-property capital values to fall by 2.9% y/y. …
20th December 2019
Recent mass retail fund outflows are not good news for the beleaguered UK commercial property market. In our view, this trend is not surprising given declining returns and, while we see downside to our forecasts if outflows don’t stabilise post-election, …
12th December 2019
Assuming a Brexit deal is agreed by the 31st January, the improved economic outlook is unlikely to support a rebound in commercial property investment in 2020. Indeed, we predict that a rise in yields will cause capital values to fall next year. And given …
6th December 2019
Given that employment growth has probably peaked, we expect office occupier demand to slow further over the next year or so, which will act as a drag on rental value growth. But the labour market may not be as tight as it first appears, so the risks to …
5th December 2019
In view of the wider interest, this UK Housing Market Focus is made available to clients of the UK Commercial Property service as well. Relative to past norms, returns on residential property will underperform over the next few years. But with commercial …
Construction falls for seventh consecutive month November’s headline construction PMI increased from last month, which pointed towards the slowest decline in construction output since July. Nevertheless, it continues to point to a deterioration. The …
3rd December 2019
After a sustained upturn in commercial property, yields are well below their historic lows and there are concerns that the current cycle could end as badly as previous ones. But we don’t think a crash is likely yet. Nonetheless, while we expect a rare …
2nd December 2019
Total returns outlook for next year weakens The November’s IPF Consensus survey highlighted a weakening in the property outlook in the next year, though compensated by some improvement in 2021. Despite this, we think they are still too upbeat about …
29th November 2019
Net lending expected to slow Net lending to property was relatively weak in October. And we don’t expect much of an improvement over the coming months as all-property capital values continue to decline and interest rates look likely to increase. Net …
Capital values have been falling since late 2018 (See Chart 1.) This has led by declining retail capital values and slowing growth in office and industrial. We expect that all-property yields will continue to rise next year, driving further declines in …
22nd November 2019
Overview – Regardless of the outcome of the election and Brexit, we expect all-property returns to be weak over coming years. Indeed, even if a deal is secured and economic growth picks up, we expect weakness in the retail sector to weigh on all-property …
13th November 2019
As the markets have not fully priced in the Conservatives winning the general election on 12 th December and securing a Brexit deal, if that were to happen we suspect the pound would climb from $1.28 now to $1.35, 10-year gilt yields could rise from 0.76% …
Concern over prolonged Brexit uncertainty The deterioration in workload expectations is consistent with the fact that, with Brexit uncertainty prolonged and commercial property values expected to fall, a strong increase in the construction activity is …
7th November 2019
With Brexit delayed and a general election ahead, all our Brexit scenarios remain on the table. However, recent developments mean that, under each scenario, we think that all-property capital values will fall by less than previously expected, but most …
5th November 2019
First increase in four months, but no recovery in sight October’s headline construction PMI increased for the first time in four months. But it continues to point to a deterioration in construction activity. Further, with Brexit-uncertainty prolonged, a …
4th November 2019
Activity weighed down by uncertainty and retail weakness The RICS survey adds to the picture that weakness in the retail sector and Brexit-related uncertainty will continue to weigh on all-property rental values over coming quarters. The RICS Commercial …
31st October 2019
Upward trend in net lending not likely to continue We don’t expect the recent strength of net lending to property to be sustained as demand for credit is likely to be held back by falling all-property capital values and higher lending costs. Following an …
29th October 2019
This rise in all-property rental value growth in September was not enough to prevent capital values falling on an annual basis for the fifth consecutive month. (See Chart 1.) The fact that the chance of a no deal Brexit has reduced is positive for the …
25th October 2019
In the near-term, we think that the ongoing consequences of CVAs and the large share of over-rented property will exacerbate the structural reduction in demand for retail property, causing rental values to fall sharply. But, with consumer demand expected …
The financial woes of WeWork have cast doubts over its long-run future and, given the reliance of the London office market on the co-working trailblazer, on the property outlook. In our view, this is a real concern, but it is unlikely to be the hammer …
21st October 2019
We expect weak global growth to keep a lid on UK tourist flows. And with yields most likely to continue to rise, hotel capital values are likely to fall over the next few years. A weak global economy and ongoing Brexit uncertainty weighed on tourist flows …
18th October 2019
Lenders continue to tighten credit A weaker economic outlook and stronger risk aversion among lenders led banks to tighten credit availability in Q3. What’s more, lending to commercial property was also reined in. According the Bank of England’s Credit …
17th October 2019
The recent stabilisation in MSCI’s monthly measure of shopping centre rental value growth appears to reflect coverage issues rather than signs that an improvement is on the way. As such, we are comfortable with our forecast that rental value growth will …
7th October 2019
There has been a dramatic expansion in the co-working office sector globally over the last five years. As these operators use a different approach to traditional landlords, this brings new risks to office markets, though we feel it is probably too soon to …
2nd October 2019
Construction output set to drop in Q3 The fall in the headline construction PMI in September suggests that construction output contracted in Q3. For the commercial property sector, the softer supply pipeline may limit rental values falls. Meanwhile, we …
The rise in net lending unlikely to last August’s solid rise in net lending is unlikely to be sustained. Indeed, with capital values set to decline further in the months ahead, we expect that demand for credit will fall from its current levels this year. …
30th September 2019
In August, stronger rental value growth in the office and industrial sectors meant that annual all-property rental value growth held steady. (See Chart 1.) This is consistent with the recent improvement in economic activity, following the contraction in …
26th September 2019
The use of retail CVAs may have peaked. However, given that CVAs lower the overall market rent and that those retailers who have been subject to a CVA are still at risk of insolvency, we think that retail rental values have further to fall. Since early …
23rd September 2019
The divergence between Central London office rental value growth and vacancy rates appears to have reflected a combination of the rising share of take-up by flexible office providers and weak landlord bargaining power. This is consistent with our forecast …
16th September 2019
With job creation driven in part by self-employed workers, the recent resilience of the labour market appears to be less positive for occupier demand. What’s more, the weakness in economic activity and falling job vacancies suggest that office-based …
11th September 2019
Brexit heightens uncertainty, but retail remains the main drag The IPF Consensus forecast downgraded its forecasts for all-property total returns this year to 0.9% p.a.. Although the outcome of Brexit is likely to be an important driver of commercial …
6th September 2019
Construction continues to contract The decline in the headline construction PMI in August provides further evidence that construction activity has failed to recover so far in Q3. With firms cautious about the outlook, commercial property construction …
3rd September 2019
Net lending falls for first time in five months The decline in net lending in July is consistent with our view that net lending will be subdued over the rest of the year, as Brexit-related uncertainty and falling capital values weigh on credit demand. …
30th August 2019
Measures of covenant strength suggest that retail sector and West End office tenants are most at risk of default. With only a small share of these properties under-rented, this is consistent with our expectation that yields will increase the most for …
29th August 2019
Although there have been signs that economic activity has improved in Q3, the slowdown in the commercial property market looks set to continue. In July, all-property rental values barely grew and yields rose across most sub-sectors. (See Chart 1.) …
27th August 2019
After almost a decade of ultra-low interest rates and rising real estate valuations, concerns have been voiced about the outlook for property. In our view, these worries are not completely unfounded and returns are likely to moderate, but crash fears are, …
21st August 2019
In coming years, we think that increases in retail yields will cause all-property yields to rise, irrespective of our expectations for interest rates and the economy. However, further out, if all-property yields continue to be less responsive to changes …
20th August 2019
Overview – Regardless of the Brexit outcome, we expect all-property returns to be squeezed as a result of weakness in the retail sector. However, as Brexit could dramatically alter the near-term outlook for the economy and UK commercial property, we are …
15th August 2019
The global shift away from risky assets and towards safer ones that seems to be underway will either be exacerbated by a no deal Brexit on 31 st October or cushioned by a deal or a delay. Although a lot of bad news has already been priced into UK gilt …
12th August 2019
Weakness in investment activity is likely to extend into the rest of the year. Even if a Brexit deal is secured, we think that higher interest rates and stretched valuations, along with bleak rental value prospects in the retail sector, will put a …
6th August 2019
With valuations looking stretched and the rental value outlook weak, regardless of how the pound moves in response to Brexit, we do not expect a rebound in overseas demand for property. Our three Brexit scenarios, as outlined in the latest UK Economics …
30th July 2019
Net lending to slow over rest of 2019 The rise in net lending to real estate during June was unexpectedly strong. But with uncertainty high and capital values expected to fall further, we don’t expect the recent vigour to be maintained over the rest of …
29th July 2019
Occupier conditions decline for fifth consecutive quarter Weakness in the retail sector is expected to weigh on all-property rental values this year. However, surveyors do not expect the commercial property sector to experience a hard landing. The RICS …
25th July 2019
Our view that the commercial property downturn has further to run was backed up by a pickup in the pace of decline in all-property capital values in June. However, at the halfway point in the year, industrial returns continue to outperform returns on …
24th July 2019
Surveyors more positive about the outlook Although the improvement in workload expectations was encouraging, with Brexit uncertainty prolonged and commercial property values expected to fall, a strong increase in the development pipeline is unlikely. The …
18th July 2019
Credit availability eases in Q2 Lenders reported a drop in mortgage availability in Q2. And while that decline is expected to reverse in Q3, we doubt that will translate into a rebound in mortgage lending. Meanwhile, credit conditions for commercial real …
The July Financial Stability Report (FSR) noted weak foreign investment and sharp outflows from open-ended property funds as two key risks for commercial property this year. In fact, estimates of the sensitivity of property fund redemptions to price …
15th July 2019
