Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
Improving supply chains temporarily boost construction activity The surprise increase in the construction PMI reflected an improvement on the supply side, as easing demand cut delivery times and improved contractor availability. But a slowing economy …
6th October 2022
Looser-than-expected fiscal policy following the mini-Budget means we now expect Bank Rate and gilt yields to be higher. All else equal, that would push the spread between the 10-year yield and all-property equivalent yields to its lowest since the GFC. …
4th October 2022
With no end in sight to China’s zero-COVID policy, the dearth of Chinese tourists visiting Europe will suppress a key revenue source for luxury retailers and poses a downside risk to our already-weak prime retail rental forecasts. And even though …
30th September 2022
Economic headwinds weigh on lending to property Net lending to commercial property was negative for the second consecutive month as economic headwinds weighed on investor sentiment. With the cost-of-living crisis constraining rental growth and rising …
All-property yields saw a large rise in August, as concerns around valuations increased. (See Chart 1.) And, with the energy support package set to boost interest rates and the economy probably already in a mild recession, yields will see further …
22nd September 2022
After reaching close to a record high at the start of 2021, the gap between supermarket and all-retail equivalent yields has since fallen back to its pre-COVID-19 level. That is likely to reflect the decline in sales at food stores as the economy has …
16th September 2022
By boosting real disposable incomes, the energy price cap will give some support to commercial rents, particularly in consumer-facing sectors such as leisure and retail. However, that benefit needs to be set against the risk that interest rates will now …
14th September 2022
Recent surveys suggest that our forecast that 50% of office employees will go into work every day is too high. But it also looks like the vast majority of those working from home will only do so part time. That complicates the outlook for office demand. …
8th September 2022
Higher property yields cut total return forecasts in 2022 and 2023 The latest IPF Consensus Survey showed a significant downgrade for total returns in 2022 and 2023, as higher yields hit capital value forecasts. But with those hikes in yields now …
7th September 2022
Rise masks deteriorating outlook The surprise increase in the construction PMI is little cause for optimism given it was driven by the reversal of an idiosyncratic fall in civil engineering activity a month earlier. Indeed, the commercial activity …
6th September 2022
Our forecast that the energy crisis will push the euro-zone and UK economies into recession while the US gets away with a milder slowdown suggests that the euro and the pound will weaken further against the US dollar. We think the pound will fall from …
31st August 2022
Net lending to property falls back as headwinds strengthen Net lending to the commercial property sector fell back in July, as mounting economic headwinds and stretched valuations weighed on investor sentiment. We expect lending will see further …
30th August 2022
Overview – Surging inflation and the upcoming recession will cut real household disposable incomes, which are set to see their largest fall on record. That drop in spending power will hit demand for all property sectors, but consumer-facing sectors …
23rd August 2022
The latest figures suggest that Build to Rent (BTR) investment has continued to expand rapidly. Despite this trend, which predates COVID-19, the sector remains under-developed by international standards. But with plenty of opportunities for investors, we …
16th August 2022
Commercial property wasn’t initially hit by the worsening in economic conditions at the turn of the year, but there are now growing signs of anxiety. Not only that, but even if the economic gloom is short lived and any downturn is mild, we expect …
12th August 2022
Commercial property valuations worsened for the sixth quarter in a row in Q2, and for all-property is now the most overvalued since late 2007. But since the end of June gilt yields have edged back and we doubt they will match their previous peak over the …
11th August 2022
Higher interest rates to weigh on construction activity in H2 The latest RICS Construction Survey showed a further rise in workloads during Q2, though sentiment for the next 12 months worsened slightly. With labour and supply shortages remaining a major …
4th August 2022
Optimism misplaced as activity slows The fourth consecutive decline in the headline construction PMI took the index below 50 for the first time since January 2021. While driven by an idiosyncratic drop in civil engineering activity, the upbeat new orders …
As the cost-of-living crisis bites consumers will be forced to cut back on discretionary spending, with the leisure sector set to suffer as a result. At the same time, operators are facing shortages of labour and rising costs. We have therefore cut our …
2nd August 2022
Net lending to property ticks up, but improvement will be short-lived Lending activity in the commercial property sector surprised on the upside in June, driven by a rise in net lending to standing property investments. But looking ahead, rising interest …
29th July 2022
Recovery in occupier activity proves short-lived After briefly recovering in Q1, the latest RICS survey showed that occupier demand dropped back in Q2 as concerns over the economic outlook and cost pressures weighed on activity. Both rental and capital …
28th July 2022
With inflation now set to rise to 12% by October, interest rates on the rise and the economy on the brink of recession, the 21-month streak of yield compression is at an end. (See Chart 1.) Coupled with subdued rental growth, that means all-property total …
22nd July 2022
The latest revisions to our UK economic view indicate that a recession is now unavoidable. This will weigh on commercial property performance into next year, but the dip is expected to be fairly mild and as such we have made only modest downward revisions …
20th July 2022
Lenders to tighten credit standards even as demand softens The Q2 credit conditions survey shows that lenders will not loosen credit conditions to keep the house price boom going like they did in 2004-2007. Indeed, despite the fact demand is expected to …
14th July 2022
Structural changes to how we live, work and shop have supported retail warehouse rents over the last couple of years relative to other retail sub-sectors. We expect this outperformance will continue, although even here rental growth will slow as consumer …
13th July 2022
The rise in interest rates and bond yields has put property yields back under the microscope. Property valuations are now stretched and a traditional fair value analysis points toward a rise in property yields, which aligns with our view of a 40bps rise …
8th July 2022
Slowdown in construction activity intensifies in June The third consecutive monthly fall in the construction PMI suggests that that growth in development activity is slowing. The near-term outlook has also deteriorated, with growth in new orders easing …
6th July 2022
Net lending cools in line with weaker investment activity Lending activity in the commercial property sector cooled in May, consistent with the weaker investment data seen in recent months. Looking ahead, we expect rising interest rates and high property …
1st July 2022
After a solid start to the year, investment activity showed signs of cooling during the second quarter. We think that stretched valuations, an increasingly negative financing gap and economic uncertainty are set to weigh on investment activity over the …
30th June 2022
Student enrolment remained robust during the last couple of years and is likely to continue growing strongly over the next decade. But supply of purpose-built beds has grown less rapidly and the pipeline points to a continued lag against demand. This …
24th June 2022
Annual all-property rental growth reached a five-year high in May, while returns rose to levels last seen in mid-1994. But signs of a slowdown also emerged, especially in the red-hot industrial sector, where capital value growth and total returns eased …
22nd June 2022
After a more severe downturn in 2020, Manchester office rental growth has caught up with other regional cities in recent quarters. While employment growth and occupier activity may remain fairly weak, tight new supply dynamics should see Manchester office …
17th June 2022
A recent MSCI article speculated that real estate investment could buck the deglobalisation trend given distinct features of the asset class, though we are not convinced that will bring many benefits. We have been writing about the end of globalisation …
14th June 2022
The latest London Crane Survey showed office space under construction rose marginally, but will increase further as supply rises. This supports our view that increased supply over the next two years will keep vacancy rates high. As a result, we expect …
9th June 2022
Construction sentiment worsens as economic headwinds mount The second consecutive fall in the construction PMI in May points to a sustained slowdown in development activity. And with the new orders balance easing and optimism of future demand declining, a …
8th June 2022
Net lending defied economic headwinds in April Net lending to property rose sharply in April, after three consecutive months of easing. But the latest jump is most likely a once-off as we expect that credit demand will be dented by rising interest rates …
31st May 2022
Strong Q1 performance pushes 2022 forecasts higher The latest IPF Consensus Survey indicates that the outlook for this year is stronger than expected three months ago, though after 2022 forecasts were more pessimistic. Our view remains more downbeat than …
27th May 2022
If we are right in expecting inflationary pressure to stay strong even as the economy gets dangerously close to a recession, then the prices of gilts and UK equities will probably fall further over the next year. Our forecast that the Bank of England will …
26th May 2022
Overview – The worsening monetary outlook is expected to weigh on property performance. With inflation set to peak at 10% y/y that will force interest rate to 3.0% next year. This will reverse the recent momentum in the commercial property sector, as …
20th May 2022
One of the unforeseen consequences of the homeworking revolution is its negative impact on city centre retail footfall. The evidence suggests that in urban centres there is a link between higher levels of remote work and poorer retail performance, which …
13th May 2022
Commercial property valuations worsened further in Q1 and now look overvalued. The spread between property and gilt yields narrowed to its lowest level post-GFC, but still has some distance to fall to reach the lows of 2007. With more interest rate hikes …
10th May 2022
Reality bites as PMI shows signs of a slowdown in activity The construction PMI for April showed that building activity remained solid, but that the pace of growth has slowed. An easing in new orders growth also hints at a further slowdown ahead, as the …
6th May 2022
Construction sector activity to face rising pressures in short term The latest RICS Construction Survey indicated that activity in Q1 remained solid, while sentiment about for the next 12 months remained optimistic. But it also showed that labour and …
5th May 2022
Subdued net lending expected to be the norm in the near term Net lending to property eased for a third consecutive month in March, but continued to show growth. We expect increasing economic headwinds and structural changes within some sectors to weigh on …
4th May 2022
Our new, higher, UK interest rate forecast means we now expect commercial property yields will start to rise by the end of this year, earlier than in our previous profile. Intensifying inflationary pressures led us to revise our forecasts in our latest UK …
29th April 2022
Office and retail occupier activity stages a comeback The latest RICS survey showed that office and retail occupier activity improved significantly in Q1 and that respondents were more positive about the prospects for property over the next 12 months. But …
28th April 2022
The latest monthly MSCI figures indicate that commercial property is holding up well. Rental growth rose further in March, while annual total returns matched July 2010 levels, which were the highest since Q3 1994. Industrial continues to be the driving …
22nd April 2022
We think the recent upturn in office market performance is largely down to the one-off release of pent-up demand and remain downbeat about future prospects. With occupancy still languishing and remote working firmly established, we think that the risks to …
21st April 2022
Investor interest in the life sciences sector has jumped since the onset of the pandemic. Increased investment and employment opportunities are expected to continue to support demand for related office space, with UK centres, notably Oxford and Cambridge, …
14th April 2022
Rising market rates tighten conditions Banks expect mortgage availability to fall back in Q2 as lenders push up borrowing rates to reflect increases in Bank Rate, but other lending criteria are expected to be stable or loosen. The availability of mortgage …
