The latest Property Snapshot from Colliers International reveals that despite economic growth in Q3, business and consumer confidence remains low. According to the commentary, the Chancellor’s Autumn Statement has offered little fiscal stimulus, focusing more on long-term structural reform, meaning that increased confidence and a sustainable recovery is not likely until late 2013 or, more probably, 2014.
Dr Walter Boettcher, Director of Research and Forecasting at Colliers International, summarised the findings of December’s Property Snapshot, as follows:
Investment: Monthly volumes were up year on year for the fifth consecutive month with the total year to date in line with 2011 at £27.3bn; a reasonable year end is in the making, but last year’s £32bn is unlikely to be exceeded significantly. UK property investment is still driven by foreign investors who have accounted for 54 per cent of purchases by value so far in Q4 12. In November, 72 per cent of overseas investment was ‘core’ or ‘core+’, with another 21 per cent invested opportunistically. The year-end rush is taking shape with a near 50-50 split between opportunistic and core purchases. Regional assets have come to market through portfolio sales at double digit yields.
Retail: The Centre for Retail Research reports that 52 retailers have gone into administration in 2012, affecting 3,907 shops and 48,000 employees. Analysis by Colliers International suggests that the ‘survival rate’ for shops in administration has fallen from 47 per cent in Q4 11 to 31 per cent in Q4 12. Trading margins remain tough, especially for non-food shops. Retail sales prices remain under pressure. Little evidence of rental recovery outside of London is evident.
Offices: Mergers & Acquisition data for Q3 12 shows that UK companies engaged in 47 deals in Q3 12 valued at £537m; the figures are the lowest since the series began in Q1 87. UK acquisitions by foreign companies were also low with 31 deals valued at £8.5bn. Demand is sluggish with uncertainty impacting, although Grade A absorption is positive. The City and selected regional cities will feel pressure from mid-2013.
Industrial: Logistics and distribution demand is relatively steady around airports and important transport hubs. South East multi-let demand remains steady, especially inside the M25. Tenants are cost sensitive, with limited funds to support expansion or relocation; hence landlords are offering to re-gear and use the opportunity to upgrade tired facilities. Re-gears are up as tenants remain very cost conscious. Speculative activity is still limited despite lack of space. Distribution continues to benefit from internet sales growth.
Residential: Uncertainty about new taxes for ‘non-doms’ was alleviated by the Autumn Statement. Also the Finance Bill (11 Dec) revealed the level of annual charges for properties owned through ‘corporate envelopes’ worth £2m or more. The Autumn Statement and Finance Bill have brought greater certainty and should stimulate a recovery in prime Central London residential investment, which was down by 25 per cent since the April Budget. The Funding for Lending Scheme is impacting mortgage availability and rates positively.