Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
Much of the economic data has had a slightly healthier tone this month, but it is too soon to know how durable the apparent improvement might be. Meanwhile, although rental values were flat again in January, capital values edged lower for the second …
22nd February 2012
The fact that employment began to rise again in the final stages of 2011 may be less positive for the occupier demand outlook than it appears at first sight. Driven entirely by part-time jobs, the rise in employment is almost certainly further evidence of …
16th February 2012
Capital values edged down in the final stages of 2011 and the weak macroeconomic outlook means that this will not be a blip. The economy will drop back into recession this year. And that will push IPD all-property rental values down by about 2% in 2012. A …
13th February 2012
Given that official data have already shown that construction output fell in Q4, the negative headline balance from today’s RICS construction survey was no surprise. More interestingly, the sector data suggested that commercial property developers are …
8th February 2012
Viewed over a 30-year horizon, there may be a case for thinking that IPD industrial rental values have become largely immune to overhangs of vacant space. However, over the past decade, the relationship between availability and rents has changed, not …
The fact that the retail warehouse secondary to prime yield spread is now not too far away from its 2006-07 lows may not necessarily make this sub-sector vulnerable to underperformance in the near term. But it does suggest that when the economy and risk …
7th February 2012
The CIPS/Markit PMI showed that commercial property construction activity expanded for the 23 rd consecutive month in January. But with the economy likely to remain very weak, we think that the risks to occupier demand for property, development activity …
2nd February 2012
The UK appears to have fallen down the rankings as a target market for global property investors. In absolute terms, there is plenty of cause for caution about the outlook for UK capital values and total returns. But the prospects for the euro-zone …
1st February 2012
The latest data from the Bank of England confirm that the commercial property lending environment deteriorated markedly in the final stages of last year. Unfortunately, all the signs are that lending conditions are likely to get tougher in the coming …
31st January 2012
All-property initial yields rose from 6.19% in November to 6.22% in December. Aside from a temporary blip in October 2010, that was the first rise in yields since June 2009. In turn, capital values fell by 0.1%m/m, the first decline since mid-2009. These …
26th January 2012
A few local hot-spots aside, 2011 was not a great year for UK property markets. But the signs are that 2012 will be worse. Activity will remain weak and both commercial and residential property prices are likely to fall by at least 5%. If events in the …
25th January 2012
The falls in industrial rental values over the past few years have been much smaller than those seen in the early 1990s and also modest in relation to the depth of the 2008-09 recession. We suspect that this drop in the sensitivity of industrial rents to …
20th January 2012
Tesco’s plan to scale back its new-store expansion won’t have any direct impact on existing occupier demand for retail property. But the decision is symptomatic of wider weakness in consumer spending and only supports our view that retail rental values …
16th January 2012
The tone of the latest RICS commercial property survey was very downbeat and supports our view that rental values will decline this year. For now, the consensus forecast is that rents will increase slightly in 2012, but it may only be a matter of time …
12th January 2012
The results of the latest CBI/PwC Financial Services Survey suggest that, over the next six to nine months, Central London office rental value growth will slow pretty sharply from its current rate of around 7%y/y to zero. Given the weak economy, this …
9th January 2012
Today’s Credit Conditions Survey showed that the supply of residential mortgage finance continues to improve slowly. But with lenders now tightening credit scoring criteria again, this is less positive than it initially seems. In the commercial property …
5th January 2012
Net lending flows to commercial property rebounded in November but, given the sluggish economy and rising tensions in financial markets, a sustained improvement in the lending environment seems unlikely. Meanwhile, the commercial construction PMI dropped …
4th January 2012
Official statistics suggest that sentiment towards commercial property among institutional investors held up fairly well in the third quarter. But more timely monthly figures suggest that net investment flows have moved sharply into reverse in the closing …
21st December 2011
Property Archive reported that, thanks to the office sector, investment market activity rose for the seventh month in a row in November. But there are now signs of a nascent sell-off by investing institutions. While this may simply reflect normal seasonal …
19th December 2011
Given the sharp growth in trading activity in the property futures market, conceptually its pricing data perhaps give a better guide than swaps to the near-term prospects for physical property capital values. In reality, however, futures and swaps pricing …
15th December 2011
Financial and business services (FBS) sector employment rose strongly in Q3, which will have supported Central London office rental values. But a raft of banking job cuts have been announced since Q3 and the risks around the City and West End office …
14th December 2011
Even if we are right and non-bank financial institutions, e.g. insurance companies and pension funds, start to lend more meaningfully to commercial property this can only ever be a partial and/or temporary fix. For example, non-bank lenders may just …
12th December 2011
At face value, net disposals of property by investing institutions in each of the past three months could be a sign that capital values will start to fall again very soon. Equally, however, it could simply reflect the normal late-year rise in …
7th December 2011
By volume, merger and acquisition (M&A) activity involving UK firms in Q3 dropped to levels last seen at the time of the credit crunch and deep recession in late 2008 and early 2009. These data, therefore, tend to add to our concerns about the health of …
6th December 2011
The CIPS/Markit PMI for November showed a slight slowdown in the pace of growth in commercial property construction. Looking ahead, given very weak economic prospects, the risks to occupier demand, development activity and rental values would all seem to …
2nd December 2011
The recent underperformance by shopping centre rental values is unlikely to persist throughout 2012. But this does not mean that we envisage a recovery. Instead, we think that where shopping centres lead, standard shop and retail warehouse rental values …
Despite further large falls in gilt yields and little overall change in equity prices over the last quarter, we doubt that markets have fully appreciated the likely impact of the euro-zone debt crisis on the UK economy. Indeed, if the recession that we …
30th November 2011
Net lending flows to commercial property in October, of minus £1.3bn, were the worst since September last year. Given lenders’ focus on reducing property exposure, net lending flows are set to remain very weak for some time to come. … Lending to …
29th November 2011
Respondents to the IPF Consensus Forecasts no longer expect all-property capital values to hold up next year and have pencilled in renewed falls of about 2%, driven solely by higher yields. Reflecting our strong concerns about the real economy, however, …
25th November 2011
Property Archive figures showed that, driven by a rise in the office sector, investment market activity improved again in October, increasing from £2.5bn in September to £2.8bn. Even so, anecdotal evidence suggests that transactions activity has fallen …
24th November 2011
Today’s RICS construction survey again showed divergent trends, with declines in public sector activity in Q3 broadly offset by growth in the private sector. But in turn, the latter depended solely on continued – but slower – growth in commercial property …
23rd November 2011
Respondents to the Colliers/Real Estate Capital survey now expect commercial property prices to fall in 2012. The anticipated decline is roughly 2%, driven by adverse yield impact. However, we suspect that respondents to this survey are still too sanguine …
21st November 2011
The order books of UK manufacturing firms have taken a knock over the past few months and the steadily weakening prospects for the euro-zone suggest that there is worse to come. All else equal, this will undermine industrial rental values. But there are …
17th November 2011
We think that UK GDP will be flat in 2012 as a whole, with a technical recession likely in H1. Accordingly, commercial property rental values are likely to fall next year and income security fears will push up required yields. Our forecast is that …
14th November 2011
To us, it seems likely that the worst of the effects of fiscal tightening on public sector demand for Central London offices has not yet passed. To be fair, the public sector probably accounts for less than 10% of occupied London office space. Even so, …
11th November 2011
We do not think that the increase in average property yields of around 80bps that has been recorded on the transactions-based Property Archive data over the past nine months will be mirrored fully by the IPD figures. Even so, the rise itself cannot be …
7th November 2011
Today’s PMI showed that commercial property construction continued to expand at a steady pace in October. But with development finance remaining restricted and the economic and, hence, occupier market outlook having deteriorated sharply, we suspect that …
2nd November 2011
In Q3, net commercial property lending flows dipped back into negative territory. Given lenders’ high exposure to the sector, along with the rapidly weakening economic backdrop, there seems little prospect of increased lending any time soon. … Lending …
31st October 2011
All-property rental values again held broadly steady in September, which has now been the case for 21 months. But this continues to be largely due to Central London office markets. Looking ahead, however, we now think that the economic prospects are weak …
27th October 2011
Despite the fragile economic backdrop and in contrast to the office and industrial sectors, retail property landlords have recently enjoyed positive income growth. In our view, however, with consumer spending set to fall further, this outperformance will …
25th October 2011
Over the next 12 to 18 months, we now expect IPD all-property rental values to decline. And there was little in the latest Lease Events Review from Strutt & Parker (S&P) and IPD to suggest that the majority of landlords will be able to insulate fully …
21st October 2011
The economic outlook continues to deteriorate pretty rapidly and, reflecting downgrades to our macro forecasts, we have now cut our expectations for UK commercial property returns. Rather than remaining broadly flat next year, we now think that …
20th October 2011
The euro-zone debt crisis is likely to have severe adverse effects on the UK economy at a time when domestic contractionary forces are building. We now expect UK GDP growth to slow from about 0.8% this year to around zero in 2012, with a high chance of a …
18th October 2011
The overall tone of the latest RICS commercial property survey took a marked turn for the worse. Indeed, the survey did nothing to ease concerns that, over the past three months, the risks of a renewed economic recession and thus a second downward leg for …
15th October 2011
Commercial property is no longer obviously undervalued and, rather than a shortage of cash, it is a lack of suitable buildings available to buy that is currently the biggest problem for many investors. Given this, we suspect that any direct or indirect …
11th October 2011
Despite recent financial markets turmoil and the knock-on effects for the real economy, we do not think that the outlook for growth and employment has yet deteriorated to a level that merits a downgrade to our UK commercial property forecasts. Rather, we …
6th October 2011
Today’s CIPS/Markit PMI showed that commercial property construction continues to grow steadily. However, the weak economic outlook suggests that it is more likely to slow sharply over the medium term than to continue to expand. Elsewhere, ONS figures …
5th October 2011
Compared with recent quarters, the tone of the latest CBI/PwC Financial Services Survey was pretty weak. Of course, given the turmoil of the past few months, that is no major surprise. Even so, today’s survey data nevertheless tend to support anecdotal …
4th October 2011
In August, net lending to the economy as a whole rebounded strongly from July’s weak result. But lending to commercial property was an exception. There seems little prospect that new credit for commercial property will become any easier to get for some …
30th September 2011
Today’s Bank of England Credit Conditions Survey suggested that the near-term outlook for residential property lending, if anything, may be slightly more positive than in the commercial property sector. But with the economic recovery now faltering, we …
29th September 2011
