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Rental growth hits a three-year high

Commercial property’s recent good run continued in October. The annual rate of rental growth surged ahead after only breaching positive territory for the first time in almost two years during August. However, given the economy’s headwinds over the near term, we suspect that property markets will struggle to maintain their current pace. Once this year’s rebound passes, we expect total returns to soften over the forecast period, as yields stabilise and structural changes within retail and offices weigh on rental growth.
Pieter Du Preez Property Economist
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UK Commercial Property Update

Student accommodation rent growth to stay solid

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 demand-supply imbalance will likely support solid rent growth over the coming years.

24 June 2022

UK Commercial Property Chart Book

Signs of a slowdown emerging

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 for the first time in almost two years. In addition, the recovery in retail and offices lost some steam, with monthly rental growth rates nudging lower. We expect the pace of growth will let up soon as yields start to stabilise and structural changes weigh on occupier demand. As such, we expect returns to cool to below 10% by end-2022.

22 June 2022

UK Commercial Property Update

Will Manchester office rental growth outperform again?

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 rents rising broadly in line with the average of other regional offices over the short term.

17 June 2022

More from Pieter Du Preez

UK Commercial Property Data Response

Lending to commercial property (Oct.)

A drop in repayments and rise in development activity resulted in positive net lending in October for the first time since March. Despite this turnaround, credit conditions will remain tight and uncertainty about the recovery will continue to weigh on lending in the near term.

29 November 2021

UK Commercial Property Data Response

IPF Consensus Forecasts (Nov.)

The resilience of the commercial property market has led to further upgrades to the IPF Consensus view for this year, albeit still below our forecast. Beyond this year, we are more downbeat about the outlook than the consensus given our expectation that work-from-home will have a more lasting impact on offices.

26 November 2021

UK Commercial Property Valuation Monitor

Valuations deteriorate as spreads narrow

Compared to bonds and equities, property valuations deteriorated further in Q3. This was due to a combination of a fall in property yields on the one side and a rise in both bond and equity yields on the other. Although we expect a less dramatic fall in Q4, the risks to yields lie firmly on the downside.

12 November 2021
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