The latest Real Estate Investment Forecast from Colliers International reveals that despite the UK economy emerging from recession with growth of 1 per cent in Q3 2012, it is likely that this recovery will hit a stumbling block in early 2013. Despite this early setback for the New Year, the research still predicts that all Property Capital values will grow in 2013 at a rate of 6.7 per cent.
Mark Charlton, Head of Research & Forecasting at Colliers International commented: “The commercial property market has had a tough 2012, particularly the retail sector, which has seen a raft of administrations. 2013 will start off on a better economic footing, with higher employment levels and improved disposable income growth compared to the beginning of 2012.
“However, it is possible that the UK’s economic recovery will falter again in the first half of 2013 as increased energy tariffs bite and eurozone uncertainty continues to impact business confidence. Nevertheless, we expect all Property Capital values to grow slightly in 2013.”
Below is a breakdown of the Q4 2012 Real Estate Investment Forecast by property sector:
Retail: The retail industry has had a tough 2012, with 52 retailer administrations in the first 11 months of the year. However, next year is shaping up to be slightly better, with growth in GDP forecast to be 1.2 per cent as well as falling inflation, although there are still headwinds to be faced by the retail sector. This has resulted in Colliers International lowering its forecasts for 2013 to a total return of 5.9 per cent for the year.
Offices: Investment activity in the UK office sector during October and November totalled over £2.3 billion (83 transactions), with 80 per cent of this coming from overseas. This is up 33.5 per cent on the same period last year, which continues a strong year for the office sector. Colliers International is predicting that this will continue into 2013, with total returns for the office sector likely to be just below 8 per cent, which will outperform retail and industrial.
Industrial and Logistics: In October and November, investment in the industrial sector reached £531 million (35 deals), which is up 22.9 per cent on the same period in 2011. However the outlook for 2013 is not quite as positive, with investors maintaining a risk averse stance for the sector. This has resulted in Colliers International forecasting a return of between 7-8 per cent next year.