Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
Recent RICS data suggest that office rental values across the UK may fall slightly in Q4. We suspect that this will prove too pessimistic. Even so, the data are a timely reminder of the fragility of confidence about the prospects for the economy and …
9th November 2010
The results of today’s RICS survey were very downbeat. Admittedly, they may have been unduly influenced by the fact that the survey responses were taken prior to the Spending Review announcement, when uncertainty about the government’s plans was high. …
2nd November 2010
Today’s PMI showed that the pace of growth in commercial property construction slowed in October but remained positive. To our minds, however, with economic growth set to slow next year and job losses likely to rise, the pick-up in rental value growth …
Net new lending to commercial property was negative again in Q3 but the sector’s share of total loan books remains high. However, anecdotal evidence that lenders may now be starting to take a harder line on refinancing suggests that this property exposure …
29th October 2010
Central London office rents will rise further. However, the revival of the medium-term development pipeline should ease occupiers’ fears about being stuck in unsuitable premises. Together with the faltering economic recovery that we expect in 2011, this …
28th October 2010
All-property initial yields were flat in September, at about 6.45%. By contrast, bond yields fell and,hence, the property to bond yield spread is now back at around 350bps. With economic uncertainty still high, we doubt that this spread will fall …
22nd October 2010
The dataflow on the industrial sector of the economy generally remains a little patchy but the CBI’s employment intentions balance nevertheless still points to a strong rebound in industrial property rental values next year. In our view, however, weak GDP …
19th October 2010
Over the next four to five years, we expect leisure total returns to average about 6% per year. That is lower than the returns we expect in the office and industrial sectors (both 7% per year) and only higher than the retail figure (closer to 5%) because …
14th October 2010
New shopping centre completions are likely to remain low over the next 12 to 15 months. As in the London office markets, this could lead to a spike in prime rents as occupiers compete to secure a limited supply of high-quality space. However, with the …
12th October 2010
The prospects for commercial property returns, while not without downside risks, are better than current derivatives pricing implies. The key problem here is that landlords, i.e. “producers” of commercial property, have a clear incentive to use a …
5th October 2010
Today’s PMI suggested that commercial property construction accelerated sharply in September, pointing to continued confidence on the part of developers about the prospects for occupier demand. However, this may yet prove to be a blip in a weaker trend …
4th October 2010
Net lending to commercial property was substantially negative again in August and, given banks’ and building societies’ high exposure to the sector, we would expect net lending to remain weak. Today’s Credit Conditions Survey supported that view. … Credit …
30th September 2010
The economy is now estimated to have grown by 1.2%q/q in Q2, up slightly from the original estimate of 1.1%. However, that is likely to mark the peak for growth and we continue to think that a renewed labour market downturn is on the cards. Inflation is …
28th September 2010
Today’s CBI/PwC Financial Services Survey suggested that, in Q3 2010, output in this sector of the economy rose for the fifth consecutive quarter. A composite measure of some of the main survey balances now points to IPD all-office rental values beginning …
27th September 2010
Net institutional property investment in Q2 was positive for the third consecutive quarter. With funds still having cash available to place in the market, our view remains that recent falls in property yields are unlikely to be reversed. Equally, however, …
24th September 2010
The industrial sector of the economy has recorded decent growth in recent quarters but the outlook for GDP, ultimately the key influence on demand for industrial property, remains weak. And with the existing, large overhang of vacant space likely to be …
23rd September 2010
The number of jobs in the financial & business services (FBS) sector rose again in Q2, taking the increase since the start of the year to 1.7%, or 104,000 jobs. We remain cautiously optimistic about the outlook for office rental values, though this will …
15th September 2010
With the influence of supermarkets and internet retailing likely to grow, we think that a downward trend in real high street shop rents is possible over the long run, with real rents falling by 1% to 1.5%p.a. However, by contrast, if planning rules were …
13th September 2010
Headline IPD City office rental values fell by less than the West End during the 2008/09 downturn. But effective rents in the City market actually fared much worse. Since the end of 2009, however, effective City rental values have risen much more quickly …
9th September 2010
The nascent recovery in mergers and acquisitions (M&A) activity involving UK firms appears to have stalled in Q2. Against the backdrop of subdued economic growth, M&A activity is likely to remain pretty soft. At the margin, this supports our view that the …
7th September 2010
Respondents to the IPF Consensus continue to anticipate that commercial property capital values will stabilise over the remainder of this year but will edge lower next year. The weakest forecast is for a fall of 8% in 2011. By contrast, we continue to …
3rd September 2010
Today’s PMI suggested that growth in commercial construction sector activity continued to slow in August, hinting at growing concerns amongst developers about the prospects for economic growth and occupier demand. … CIPS/Markit Construction PMI (Aug …
2nd September 2010
Data on the economy over the past month showed that the labour market continues to enjoy a rebound, with unemployment falling by about 50,000 over the past three months. However, we expect public sector job cuts to trigger renewed rises in unemployment …
25th August 2010
We think that consumer spending will struggle to grow at all for at least the next two to three years. Taking the period 2010-14 as a whole, this will result in average total returns for high street shops of around 6% per annum. These will be lower than …
23rd August 2010
The latest RICS Construction Survey suggested that activity across the sector as whole dipped in Q2. Encouragingly, however, the slump in public sector construction activity was not mirrored in the private commercial sector. … RICS Construction Survey (Q2 …
18th August 2010
Our medium-term forecasts are broadly unchanged from the previous Analyst. As we had expected, the recovery in commercial property capital values seems to have run out of steam. However, over the next two years or so, the combination of a weak economic …
16th August 2010
On the whole, markets have so far shrugged off recent concerns over a double-dip in the UK and global economies. Equity prices have recovered sharply over the last couple of months, partly on encouraging news on corporate earnings, while sterling has …
12th August 2010
Notwithstanding some less encouraging recent news (e.g. yesterday’s reports of looming job cuts at Barclays Capital), London’s City and West End office occupier markets are in recovery mode. Past experience suggests that the capital’s rebound should be …
The latest PMI reported that commercial property construction activity rose again in July. These data suggest that developers remain confident about a rental recovery by early 2011. Our view is that the rental downturn is indeed nearly over, but we remain …
3rd August 2010
It is pretty clear that property investors’ sentiment has cooled in recent weeks. Accordingly there seems to be little scope for further gains in capital values. But with bond yields likely to stay low we continue to doubt that a renewed property price …
2nd August 2010
Net lending to commercial property in Q2 was very weak. Admittedly, anecdotal evidence suggests that lenders’ wariness to the sector may have eased slightly in more recent weeks. But with their exposure to commercial property remaining high, we still …
29th July 2010
The economy grew surprisingly strongly in Q2. Indeed, the pace of expansion, at 1.1%q/q, was double the consensus expectation. Manufacturing, financial & business services and distributive trades (e.g. retailing) all contributed to growth in Q2. However, …
28th July 2010
The latest Colliers/Real Estate Capital (REC) survey suggested that rental and capital values will be largely unchanged over the next 12 to 18 months. In the absence of an obvious trigger (e.g. higher interest rates) for renewed falls, we also continue to …
27th July 2010
Forward-looking indicators of industrial production have cooled a little, though there are some better signs for employment in this sector. The latter suggests that the floor for industrial rental values could arrive sooner rather than later. However, …
21st July 2010
The tone of today’s RICS survey was downbeat and is probably a timely reminder that commercial property occupier demand and rental values remain vulnerable to further job cuts. Although we still think that the bulk of the downturn in rents has already …
20th July 2010
The more positive tone of yesterday’s labour market data was encouraging for commercial property rental values, which we still expect to find a floor later this year. However, with public sector job cuts looming, our view is that overall employment will …
15th July 2010
The number of jobs in the financial and business services (FBS) sector rose strongly in Q1 and anecdotal evidence suggests that hiring has since remained solid. Although regional offices are still likely to struggle over the next few quarters, we expect …
14th July 2010
At the time of the 2015 election, we expect commercial property prices to be more or less unchanged from their current levels. Yet despite the low interest rate environment, the outlook for residential property is far weaker. We think that we are now in …
12th July 2010
Our analysis suggests that the UK government bond yield curve has no predictive power for commercial property yields. The yield curve is potentially useful as a tool for forecasting rents, although it adds only limited value over and above the more …
8th July 2010
With the economy in recession for much of 2009, the latest data from Strutt & Parker and IPD suggest that landlords fared reasonably well last year, retaining a high proportion of tenants and in many cases even raising rents at lease expiry. Given that …
6th July 2010
The latest PMI suggests that the rebound in commercial construction activity continued in June. This points to further growth in developers’ confidence about future property demand and rents. We agree that the rental downturn is near its end, but remain …
2nd July 2010
The latest Credit Conditions Survey suggested that the supply of credit for commercial property is likely to remain restricted, but for residential borrowers it is likely to contract again. In light of this, a cautious view on the prospects for both house …
1st July 2010
Net commercial property lending flows remained negative in May, reflecting the fact that banks’ and building societies’ exposure to the sector is still very high. Further negative lending flows are likely in the months ahead. On a brighter note, UK …
29th June 2010
The Financial Stability Report (FSR) is not designed to lay out the Bank of England’s expectations for the financial system, economy or property markets. But there was enough in today’s report to suggest that the Bank remains very concerned about the …
25th June 2010
The economy remains on track to expand again in Q2, not least because retail sales posted a solid increase of 0.6%m/m in May. However, the labour market remains fragile and the Budget measures will hit households’ finances pretty hard. Of course, the …
23rd June 2010
The time series data on cross-border commercial property investment flows have a short history. But, not surprisingly in our view, they suggest that exchange rates are a far less important influence on cross-border flows than relative value and economic …
18th June 2010
Since our last Markets Analyst, there have been growing signs that the global economic recovery, and the UK’s recovery in particular, is built on fragile foundations that will buckle under the weight of the upcoming fiscal squeeze. If the UK’s recovery …
16th June 2010
The downside risks to property prices from failed refinancing of commercial mortgage-backed securities (CMBS) could linger for much of this decade. Over the next one to two years, however, relatively few of the loans that underpin the UK’s outstanding …
14th June 2010
Past experience suggests that the current trend for investors to target the income generating qualities of the best secondary stock is a comparatively low-risk strategy. Yet, even leaving aside any possibility of a double-dip recession, the weak consumer …
10th June 2010
Upward revisions in the latest survey pushed the IPF Consensus into line with our own view that IPD all-property rental values will stabilise later this year and rise modestly in 2011. Yet, depending on the strength of the Central London office market …
7th June 2010
