Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
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 …
Rising interest rates have put the outlook for property prices back under the spotlight. But, with lending practices much more restrained in this cycle and the market level loan-to-value ratio well below 50%, we don’t feel overly concerned at the prospect …
7th April 2022
PMI results mixed, with more concern on the horizon The continued strength of the construction PMI in March suggests that activity in the sector increased despite ongoing headwinds from supply constraints and cost inflation. The rise in new orders …
6th April 2022
The rental growth premium enjoyed by Central London shops has disappeared in the pandemic. And we don’t expect it to reopen, as lower footfall in the capital, the slow recovery in tourist arrivals and higher vacancy rates weigh on rental growth. All …
1st April 2022
Modest net lending set to continue Net lending to property eased further in February, though it remained in positive territory. We expect lending trends to remain fairly subdued as both economic and sector specific challenges loom over the coming months. …
29th March 2022
We think that property markets are the weak link when it comes to the impact of tightening monetary policy. A modest rise in interest rates might only cause price falls in a few obvious candidates. But rates might have to rise only a bit further than we …
25th March 2022
The latest data from the industrial sector were predictably upbeat with strong take-up and dwindling supply driving rapid rental growth. There were also signs of important shifts across UK markets that we think may be significant enough to re-cast our …
The Chancellor, Rishi Sunak, provided more support to the economy than we had expected over the next few years in today’s Spring Fiscal Statement, but he could have gone further in 2022/23. Instead, he chose to bank some extra cash so there’s scope for …
23rd March 2022
Shopping centres were the hardest hit commercial property sector during the pandemic. The latest data hint that the sector may be past the worst. But the outlook remains clouded by the threat of online shopping and weak in-store retail spending. …
Commercial property is not showing any signs of slowing down. Rental growth rose further in February, while annual total returns climbed to a level last seen in Q4 2010. Industrial remains the main driver behind overall performance, with retail also …
18th March 2022
The Chancellor, Rishi Sunak, will use his Spring Statement on 23 rd March to soften the blow for households facing rising energy and food costs. However, any hopes that he will announce a big handout may be disappointed as he tries to strike a balance …
16th March 2022
At the start of the Ukraine crisis, we felt the direct property impact would be modest, based on limited Russian ownership and capital flows. But as the conflict extends into a third week, concerns have risen about the macroeconomic impacts of the …
11th March 2022
The South East jobs market turned a corner during the second half of 2021. But while occupier activity has picked up, vacancy has also risen. As a result of this, and the effects of economic headwinds and remote working, we only expect to see modest …
10th March 2022
PMI rises further as housing activity accelerates The construction PMI rose to its highest level in eleven months in February. Although encouraging, supply constraints remain a major impediment and input costs high, which we think will limit growth in the …
4th March 2022
Net lending starts year on softer note Net lending to property fell back in January, after reaching its highest level in 18 months in December. But overall net lending remained in positive territory, though we expect a number of challenges to limit any …
1st March 2022
Industrial steers better outlook for 2022 returns The latest IPF Consensus Survey suggests that commercial property will have a better year than initially thought. Our total returns forecast for 2022 is in line with that of consensus, but beyond this year …
25th February 2022
