Property News Specialist sectors continue to feel impact of reduced discretionary spend

Specialist Sector Snapshot

Despite the impact of reduced discretionary spend upon the special sectors, many operators are beginning to see positive results as they focus on restructuring and their core businesses according to Colliers International’s latest Specialist Snapshot.

The key findings were:

  • Automotive & Roadside - There is a three-tiered roadside sector with the greatest values attributed to manufacturer tenants with strong covenants. Secure income streams with limited capital investment requirements remain in demand, while non-prime property continues to languish.
  • Recreational - 2011 has seen increased interest from mainstream and boutique funds in parks, marinas and leisure facilities in order to diversify investment portfolios and acquire alternative assets. The private market remains slow, being heavily reliant upon house sale equity and bank funding.
  • Healthcare - Falling fees, slower referral rates and increasing acuity of care is undermining operator performance. Corporate operators are beginning to look again at cost cutting measures in order to maintain profitability and generate sufficient capital to reinvest into the business.
  • Hotels - London hotels have recovered from the recession, while the provinces improve slowly. Well-financed budget chains continue to grab more market share as independents dwindle. Investor appetite remains strong.
  • Licensed and Leisure - The licensed and leisure industry is performing well in certain sectors, particularly in Central London. Investors remain interested in the sector but are still cautious, reflected by the marginal outward shift in yields, even for stronger covenants in prime locations, although demand for well-let leisure schemes remains good.

Dr. Walter Boettcher, Director, Research and Forecasting at Colliers International commented: “The specialist sector continues to feel the impact of cautionary discretionary spending as worries about the economy and Greece’s status in the EU remains uncertain. Operators are beginning to see positive results as they focus on restructuring and their core businesses. There is also evidence that bank funding is available for operators with strong balance sheets and proven management. Boutique funds increased their interest in certain sectors for diversification purposes.

"The Q3 GDP figures came in slightly above expectations but are still weak in terms of overall growth. The Eurozone debt crisis continues to stoke volatile markets, which is stimulating job security concerns as businesses are cautious in their investments. Government spending cuts continue to have an effect as the private sector hiring has yet to offset the public sector redundancies.”

Download the report here.