Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
With hindsight, part of the boom in the industrial sector seen during and after the pandemic now looks like a bubble. That raises the risk that the overhang of assets started during that period of irrational exuberance will now weigh on rents. However, …
1st December 2023
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
30th November 2023
The key indicators that have usually convinced the Bank of England to cut interest rates suggest the first cut could come in Q1 2024. That said, rates have risen to a lower peak than most models suggest, which implies they need to stay higher for longer …
Consensus more pessimistic in 2024, but view further out improves The latest IPF Consensus Survey shows that forecasters have downwardly revised their expectations for 2024, as a downgrade in capital value growth outweighed some improvement in rents. That …
29th November 2023
Strong October lending, but anaemic investment volumes While net lending to commercial property increased for the eighth consecutive month in October, this hasn’t translated into higher investment volumes – which fell back again in October. But further …
Our recent r* work reinforces the view that property yields will stay relatively high longer term. That implies global returns in low single digits over the next decade or so, well below pre-pandemic averages. Our recent Global Economics Focus summarises …
27th November 2023
Overview – Property yields rose further in Q3, but with risk-free rates now falling back, we think they will peak by the end of 2023. That will help stabilize capital values, but, given historically narrow yield spreads, we doubt we will see much yield …
24th November 2023
The net giveaway the Chancellor announced in the Autumn Statement is designed to curry favour ahead of an election late in 2024. However, fiscal policy is still being tightened in 2024/25 and it looks as though whoever wins the election will have to …
22nd November 2023
During the past decade, the global economy has transitioned out of an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Previously, most governments had believed that closer economic …
16th November 2023
Surging interest rates have not been kind to commercial property investment activity, which recently slumped to a 10-year low. But there are some reasons to think transactions will see a decent, if not spectacular, recovery in 2024. Falling interest rates …
With the government still languishing far behind in the opinion polls and an election required before the end of January 2025, the Chancellor, Jeremy Hunt, is under more pressure than ever to pull something out of the bag at the Autumn Statement on …
15th November 2023
The bankruptcy of WeWork in the US was a predictable end to a long-running saga. Its effects on office markets will not be systemic, but they will reinforce existing weaknesses and pile more bad news on the sector just at the wrong time. The announcement …
9th November 2023
Our latest UK commercial property valuation monitor is embedded below: A small rise in property yields in Q3 was not enough to offset a surge in alternative asset yields, particularly the 10-year gilt, and as a result valuations worsened. Looking ahead, …
8th November 2023
This page has been updated with additional analysis since first publication. Housing suffers but commercial surprisingly resilient The uptick in the headline CIPS construction PMI from 45.0 in September to 45.6 in October still left it below the 50 …
6th November 2023
This week we held a drop-in on the prospects for commercial property investment in the UK and Europe, which can be found here . This Update provides answers to the most interesting questions that emerged from the discussion. Will prime offices outperform? …
3rd November 2023
While we think sticky core inflation will mean that the Bank of England keeps interest rates at their peak of 5.25% until late in 2024, we think the markets have gone too far in concluding that rates will still be as high as 4.50% by the end of 2025. We …
30th October 2023
Net lending to property totaled £132mn in September, the lowest amount since February. But looking through the monthly volatility, on a 3-month basis lending has totaled more than £1.5bn in every month since March. That compares to an average of £620m …
Weak demand and investment, but capital values nearing the trough Having started the year on a somewhat promising footing, all-property occupier demand has weakened since and fell further in Q3. The demand balances for offices and retail remained …
26th October 2023
Active demand for London office space hit a four year high in Q3, but we doubt that will drive a decline in vacancy rates. Most of the rise will reflect churn as firms make moves that had been delayed by the pandemic, including those looking to reduce …
24th October 2023
The diffusion of AI technologies should be a fillip for the global economy over the coming years. That will bring benefits for real estate performance in developed economies, particularly in those office markets with concentrations of knowledge …
20th October 2023
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 minimal as …
19th October 2023
Surging interest rates caused mortgage demand to slump in Q3 at the same time as rising defaults led lenders to tighten mortgage credit conditions. Similarly, it became more difficult to secure commercial real estate loans. We expect availability of …
12th October 2023
The UK manufacturing sector has faltered in recent months, as rising interest rates and slowing economies in many parts of the world have cut global demand. That spells trouble for manufacturing demand and suggests yields in that subsector will see a …
10th October 2023
This page has been updated with additional analysis since first publication. Construction PMI falls below 50 as commercial balance plunges The decline in the headline CIPS construction PMI from 50.8 in August to 45.0 in September took it below the 50 …
5th October 2023
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
Food price inflation is now falling back, which will help boost supermarket profits. That means the recent underperformance of the supermarket sector relative to all-retail will soon come to an end. Total returns are set to turn positive in 2023 and by …
While net lending to commercial property increased for the sixth consecutive month in August, we think this resilience will wane as high interest rates and slower economic activity take a toll on investment over the remainder of the year. Net lending to …
29th September 2023
The leisure sector is now feeling the impact of the cost-of-living crisis, with rising vacancy and declining rents. But we don’t think the retail sector will follow in its footsteps. Households are likely to continue to shift spending away from expensive …
26th September 2023
22nd September 2023
Commercial construction surveys have shown improving activity in recent months, despite high interest rates and a slowing economy. Our Financial Conditions Indices (FCIs) suggest that might be because market sentiment and credit conditions have, so far, …
21st September 2023
The news that UK Prime Minster Sunak is set to further dilute the government’s climate policies demonstrates that when the political going gets tough, climate policies are the first to fall by the wayside. From a macro perspective, the biggest risk is …
20th September 2023
The surprising strength of office market rents looks to reflect the increased use of incentives. Indeed, passing rents have seen a sharp decline, with all-office annual growth recently falling to a record low of minus 3.3%. Given an upcoming recession and …
15th September 2023
The UK government’s decision to block Marks and Spencer’s (M&S’) re-development of its flagship store highlights the challenges in the transition to net zero. In particular, while authorities are using regulation to force owners into greener choices, if …
7th September 2023
Higher interest rates lead to forecast downgrades The latest IPF Consensus Survey showed a reversal of last quarter’s forecast upgrades, bringing the consensus view more in line with our own. The surge in interest rates thanks to high inflation is behind …
6th September 2023
This page has been updated with additional analysis since first publication. Construction PMIs weaken as new orders fall back The fall in the headline CIPS construction PMI from 51.7 in July to 50.8 in August left it just above the 50 “no-change” mark. …
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
