Filtered by Subscriptions: UK Commercial Property Use setting UK Commercial Property
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Property markets rebounded strongly after 2020, in part boosted by favourable structural shifts brought on by the pandemic. But …
15th December 2022
Office rental growth in London and RoUK was similar in the third quarter. But as the recession takes hold London firms will have a greater incentive, and opportunity, to make savings from the shift to working from home. That will cut demand just as a …
14th December 2022
The rise in net lending to real estate over the past couple of months may reflect some investors looking to buy commercial property assets at discounted prices. But a repeat of the mid-2000s, when lending held up even as commercial values started to fall, …
9th December 2022
Headline index starts to fall as recession cuts demand As expected, the headline CIPS construction index retreated in November as falling demand outweighed the benefit of easing prices and an increase in the availability of contractors. As the recession …
6th December 2022
Further downgrades as yields rise and rental growth falls back The latest IPF Consensus Survey showed further significant downgrades for total returns in 2022 and 2023, as higher interest rates have boosted yields and a looming recession cuts rental …
30th November 2022
Although we agree with the markets that the Bank of England will be patient and won’t pivot from raising interest rates to actually cutting interest rates until 2024, we think that fading inflation will force the Bank to cut rates quicker than investors …
Net lending sees further gains even as capital values fall Falling capital values have not yet deterred commercial property investors, with net lending to property increasing for the second month in a row in October. Bargain hunters may have given lending …
29th November 2022
Overview – The surge in interest rates in recent months has quickly been reflected in property yields, and as a result we have brought forward some of our forecasted rise in yields from 2023 into 2022. But with gilts yields set to fall back next year we …
28th November 2022
The cost-of-living crisis will have an impact on UK high streets for much of the next year. That will not be helpful for retail property rents, although given they are starting from a low base, we think the sector will avoid the meltdown of the pandemic …
18th November 2022
In his Autumn Statement, the Chancellor, Jeremy Hunt, appears to have pulled off the tricky task of reassuring the financial markets of the government’s fiscal discipline while also managing not to deepen the recession. Our economic forecasts suggest he …
17th November 2022
Even as Central London office vacancy rates rose to a 12-year peak in Q3, annual rental growth ticked-up to a three-year high. That marks a reversal from the situation prior to COVID-19, when a tight market failed to spark a strong rise in rents. But we …
15th November 2022
Commercial property valuations began to stabilise in Q3, as a large rise in property yields helped offset a further rise in alternative asset yields. And with the reversal of the “mini-Budget” meaning 10-year gilt yields have now likely peaked, a …
10th November 2022
We’ll be discussing the implications for the economy and the financial markets of the Autumn Statement in a 20-minute online briefing at 4pm GMT on 17 th November. (Register here .) In his Autumn Statement on 17 th November the Chancellor, Jeremy Hunt, …
In line with changes in our global economic view, we have made significant downgrades to our commercial real estate forecasts for the next couple of years. As a result, we now expect a much bigger drop in property values next year that will cause annual …
8th November 2022
Improvement in headline index will not last long As was the case last month, an improvement in delivery times and subcontractor availability drove a surprise rise on the headline construction PMI in October. But a slowing economy and higher financing …
4th November 2022
Construction activity set to slow as financing constraints bite The latest RICS Construction Survey showed a rise in workloads in Q3, although the gain was small. Looking ahead, a slowing economy and higher financing costs will soon lead to a cut in …
3rd November 2022
Investor caution to weigh on net lending Net lending to commercial property was positive in September but, looking through the monthly volatility, there is a clear downward trend in lending. With the economy entering a recession and property yields now …
31st October 2022
Occupier demand falls as economy slows The slowing economy and cost-of-living crisis are now having a clear impact on occupier demand, with surveyors reporting the first drop since the start of 2021. That has fed through to rent and capital value …
27th October 2022
Industrial demand is relatively well-placed to weather the upcoming recession. Vacancy is low going into the downturn and the gradual shift to online shopping will continue. It should therefore be the only sector to avoid a fall in rents. However, …
26th October 2022
Total returns see worst month since Brexit vote The rise in interest rates and upcoming recession are leading to a rapid turnaround in commercial property performance. Rental growth is starting to ease, particularly in consumer-facing sectors such as …
21st October 2022
The UK property market has a long history of either causing or worsening recessions. But that history has taught both banks and regulators a lesson. So while higher debt payments, falling property prices and a slump in construction will play a major …
19th October 2022
With interest rates now higher, we have made downgrades to our forecast for UK GDP growth. We expect that this will bring a sharper deceleration in rental growth at the all-property level, with falls now likely during 2023, led by the office sector. We …
17th October 2022
Credit conditions already tightening prior to market turmoil The Q3 credit conditions survey doesn’t capture the impact of the market turmoil of recent weeks, with the deadline for responses falling a week before the “mini-budget”. Nonetheless, it shows …
13th October 2022
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
In response to a surge in withdrawals as pension funds rushed to secure cash to meet margin calls, several property funds implemented restrictions to prevent the need for a fire-sale of assets. To date no retail funds have had to impose similar …
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
