Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
Rising interest rates have pushed down commercial property equities, which implies capital values will come under further downward pressure. That said, the large correction in equities seen in 2022 meant annual growth has now levelled out. That suggests …
5th September 2023
Net lending to commercial property was positive for the fifth consecutive month in July although, at £297m, the increase was the smallest since lending contracted in February. Both standing and development lending fell back, with the latter contracting by …
30th August 2023
The sharp drop in industrial take-up in recent quarters may be a sign that the sector is becoming more vulnerable to changes in economic conditions. Indeed, the decline has coincided with a 25% drop in online retail volumes since the end of 2020. However, …
24th August 2023
Overview – After a brief respite earlier this year, property yields are once again on the rise, driven by a further increase in gilt yields. We don’t expect a repeat of the surge seen last year, but we also think any compression beyond this year will be …
21st August 2023
In contrast to shops and retail warehouses, the nascent recovery in shopping centre rents has already faded. The shift to remote work and greater exposure to online competition has led to relatively weak sales of the type of goods shopping centres offer, …
14th August 2023
Our latest UK commercial property valuation monitor is embedded below: A small rise in property yields in Q2 was not enough to offset a surge in alternative asset yields, particularly the 10-year gilt, and as a result valuations worsened. Looking ahead …
9th August 2023
The headline CIPS construction PMI resumed its upward trend in July, with the rise to 51.7 more than reversing the drop into contractionary territory in June. All sectors saw an increase in their respective balances, with commercial rising to 54.4, its …
4th August 2023
Last week, we held a Drop-In on the future of office property, which you can view here . This Update provides answers for a variety of questions from a UK perspective that emerged from the discussion. How does the office outlook compare across regions in …
2nd August 2023
Net lending to commercial property was once again positive in June at £589m. As was the case in May, lending to standing property drove the total, as development net lending recorded a small drop of £11m. The continued growth in lending to property …
31st July 2023
Surveyors become more pessimistic about commercial outlook Following a slight improvement in Q1, surveyors reported that occupier demand fell back in Q2. All sectors saw a retrenchment, with offices seeing the largest decline to a net balance of -21%. …
27th July 2023
Our forecast that in late 2024 and 2025 the Bank of England will cut interest rates further than investors expect suggests that UK gilt yields will fall and close the current gap with US yields. Admittedly, there’s still a risk that inflation in the UK …
25th July 2023
Our latest chart pack on the UK commercial property market is embedded below. Higher-than-expected core inflation means interest rates are now set to be higher for longer and we still think the economy will enter a mild recession later this year. That’s …
20th July 2023
We have made only minor changes to our latest global forecasts which still imply that property will underperform other assets in the short to medium term. Further out real estate returns are set to recover, but, with yield spreads more compressed than in …
19th July 2023
The recent rise in gilt yields to levels above those seen in the aftermath of the mini-Budget has not triggered a similar rush to sell property assets. In part because past falls in capital values mean multi-asset funds are unlikely to become overexposed …
14th July 2023
Lenders expect narrow spreads to keep upward pressure on mortgage rates The narrowing in interest margins reported by mortgage lenders in the Credit Conditions Survey suggests that mortgage rates won’t fall significantly anytime soon. Meanwhile, it became …
13th July 2023
Construction slows as interest rates stay higher for longer and recession looms After two months of gains the headline CIPS construction PMI reversed course in May, dropping to a five-month low of 48.9, which indicated a contraction in activity. All …
6th July 2023
The recent strength of net lending to commercial property can’t be explained by a rise in investment. Instead, we suspect some investors are borrowing against older assets to provide additional equity when refinancing newer acquisitions whose loans are …
5th July 2023
We recently held a Drop-in titled “Industry’s decarbonisation challenge – From aviation to property”, which you can view on-demand here . This Update addresses some of the questions we received during the event, including those that we did not have time …
3rd July 2023
The recent fall in commercial property values has not driven a flight to quality in either the retail or industrial sectors. But there has been a sharp rise in the office non-prime/prime spread, as occupiers and investors seek best-in-class assets to …
30th June 2023
Banks’ exposure to commercial debt hits six-year high Net lending to commercial property remained in positive territory in May at £621m. And over the past three months, lending has totalled £2.3bn, the highest figure since June 2020. Loans for standing …
29th June 2023
With interest rates now set to be higher for longer, we are sticking with our view the UK will enter a recession later this year. That will hit occupier demand across all property sectors, but industrial should weather the downturn relatively well. After …
23rd June 2023
All-property yields have seen no movement for the past two months and combined with resilient rental growth that means capital values have held firm since March. (See Chart 1.) But stubbornly high inflation has led to a resurgence in interest rates and …
22nd June 2023
The latest MSCI data indicate that values in western European office markets have held up better since the start of the pandemic when compared with the US and UK. But given these cities face similar long-term problems, we remain downbeat about the …
16th June 2023
The latest Deloitte Crane Survey showed that legal firms have been an increasingly important sector for London office demand, accounting for a third of all pre-lets since Q3 2022. The rise reflects strong growth in legal jobs over the past year. In turn, …
12th June 2023
Recent economic difficulties have forced online retail to tighten their returns policies. At face value, this seems good news for retail property as it may shift demand back to stores for certain categories. However the change is unlikely to be a big …
8th June 2023
The latest crane survey reported a surge in new central London office starts in Q1, which seems poorly timed given a large existing pipeline and waning demand. However a closer look shows that West End refurbishments are behind that surge, as this …
7th June 2023
The headline CIPS construction PMI increased for a second month in a row in May to 51.6, indicating a small rise in activity. But in line with last month there was a marked difference between the commercial and housing sectors, with the former rising to …
6th June 2023
Net lending to property staged a recovery in April, rising to a 10-month high of £1.18bn. Both standing and development lending increased, with the latter now positive for each of the past three months. The pick-up in lending is in line with the Q1 RICS …
1st June 2023
Consensus becomes more optimistic, but inflation a concern The latest IPF Consensus Survey showed another upgrade to forecasts for total returns in 2023, driven by improvements to both the rental and capital value outlook. A better-than-expected start to …
31st May 2023
Overview – Higher-than-expected core inflation means interest rates are now set to be higher for longer and we still think the economy will enter a mild recession later this year. That’s not a great backdrop for commercial property and yields will need …
30th May 2023
Following a surge in property yields over the second half of last year, property moved closer to fair value again in Q1. Admittedly, on our measure the all-property score is still sitting in overvalued territory. (See Chart 1.) But that is largely due …
17th May 2023
Substantial yield compression over the past two years meant that by the middle of 2022 industrial had become the most overvalued sector since our measure began in 1992. That helps explains the subsequent 26% crash in capital values. Perhaps worryingly, …
11th May 2023
Divergence opens up between housing and commercial construction The April CIPS Construction PMI showed a growing divergence between the housing and commercial sectors, with activity in the latter seeing a gradual recovery while the former declined to a …
5th May 2023
The latest RICS Construction Survey showed an improvement in construction workloads and surveyors’ expectations also brightened. That is in line with other data showing the economy is proving more resilient than expected. That said, we still expect a mild …
4th May 2023
Net lending stable as investors wait for the bottom Even as commercial property investment has collapsed, net lending to property has been stable at close to zero since the start of the year. That suggests investors are building up war chests to snap up …
All-property yields have stabilised since the start of the year and alongside continued rental growth, that means total returns were more-or-less flat during Q1. (See Chart 1.) But, while the worst is over, the economy is still set for a mild recession, …
28th April 2023
Occupier demand ticks up, but further falls in rents and capital values likely After a weak end to 2022, surveyors reported that occupier demand was essentially flat in Q1. All sectors saw an improvement and that suggests take-up will pick-up in Q2. That …
27th April 2023
The recent resilience in economic activity and stubbornness of inflation is raising market rate expectations, gilt yields, UK equities and the pound. And there is a growing risk that interest rates rise above 4.50% and/or stay high for longer. But we …
26th April 2023
A fall in consumption this year will weigh on the retail sector, but an earlier correction in yields and rents mean it is less vulnerable to the recession. Indeed, it was the only sector to see a fall in yields in Q1. While some further rise in yields …
24th April 2023
The physical risks facing commercial property are substantial with extreme weather events like floods and wildfires set to increase in both the US and Europe over the coming decades. Property markets have yet to fully price these in, especially in areas …
21st April 2023
Exhausted household savings and an upcoming recession is set to hit hotel demand over the next year or so. However, as happened in the aftermath of the GFC, some stretched households may decide to take a domestic holiday instead of a foreign one. We doubt …
19th April 2023
Despite the cost-of-living crisis, the leisure sector did better than expected last year as households used the savings they had built up during the pandemic to boost spending on recreation and restaurants. But with those savings now exhausted and real …
13th April 2023
Construction activity holds up as housing enters the doldrums The March headline CIPS Construction PMI reversed some of its surprise jump in February, but it remained in expansionary territory. That was driven by the commercial sector, where strong …
6th April 2023
London office capital values fell by a relatively modest amount in the second half of last year and monthly data show values stabilised in the first two months of 2023. But that has left London office spreads very narrow at a time when the recent banking …
5th April 2023
Yields have stabilised since the start of the year, with the 8bps rise in equivalent yields over January and February much smaller than the 64bps increase over the final two months of 2022. (See Chart 1.) And with the UK not as exposed to the banking …
30th March 2023
Net lending turns negative as investors hold back Net lending to property turned negative in February, as investors held back in the face of falling capital values. But the decline was small and even though the recent banking crisis will lead to some …
29th March 2023
The UK commercial real estate (CRE) debt market seems to be in a better position than the US, where troubled regional banks were the main providers of finance. That said, credit conditions are also set to tighten in the UK which will make refinancing more …
22nd March 2023
While real estate is not the main cause of the current financial turbulence, as it was in the late 2000s, it has played an indirect role and may be implicated in any further instability. And property will also be vulnerable to the effects of recent …
21st March 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
We have already outlined some different scenarios of how things might evolve from here and it is still possible that the situation calms down quickly. But in this Update , we think through how the more adverse of our scenarios might evolve. There are …
16th March 2023
