Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
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
By contrast with the track record of outperformance, we expect hotel property total returns to average about 7% p.a. over 2011-13, below the all-property figure of about 8%. … Can hotels weather the consumer spending …
28th September 2011
Apart from Central London, where shop vacancy is now almost nonexistent, there remains little cause for optimism about retail occupier markets. Admittedly, there will be very few new shopping centre completions over the next 12 to 18 months. But given the …
23rd September 2011
Last week, we revised down our forecasts for 10-year government bond yields, the benchmark riskfree rate for commercial property, from 2.5% at end-2011 – and right through to end-2013 – to just 2%. All else equal, this revision would point to a near-term …
20th September 2011
In recent months, retail property rental value trends – which were already pretty weak – have taken a turn for the worse. What’s more, the recent data-flow, such as weak retail sales and problematic vacancy rates, does not bode well for the future. We …
17th September 2011
Financial and business services (FBS) sector employment edged lower in Q2, which reinforces the downside risks to Central London office rental values. For now, supply constraints should see further rental increases. But we remain comfortable with our …
15th September 2011
The recent outperformance by lower grade London offices is unlikely to be repeated in the near-term by secondary property in other sectors. Indeed, over the coming quarters, it is more likely that property investors shift back down the risk curve. For …
9th September 2011
By volume, merger and acquisition (M&A) activity involving UK firms was weak in Q2, while the recent turmoil in financial markets does not bode well for Q3. Given that M&A is an important revenue stream for many Central London office occupiers, especially …
7th September 2011
The message from the latest IPF Consensus forecasts is that the commercial property market as a whole remains set for a few slow but steady years. We broadly share that view, but are much more concerned than the Consensus about the medium-term outlook for …
3rd September 2011
The last quarter has seen UK markets respond to signs that the economic recovery is slowing as well as fears that policymakers are relatively powerless to provide additional monetary or fiscal stimulus to the economy. The turnaround in view has been …
1st September 2011
