The first Specialist Property Snapshot of the year from Colliers International reveals that despite weak economic performance in Q4 2012, ongoing uncertainty and tough trading conditions, there are positive signs to suggest that a recovery is beginning to take hold in specialist sector trading. Growth in household disposable income is supporting discretionary spending, especially in the recreational and licensed & leisure sectors. Further improvement is expected as inflation moderates further and consumer confidence begins to recover.
Dr Walter Boettcher, Director of Research and Forecasting at Colliers International, summarised the findings of January’s Specialist Property Snapshot, as follows:
Automotive: Car sales by brand are volatile with some up significantly and some down. New car sales were up 5.3 per cent year on year, but distorted by pre-registration by manufacturers. Retail customer interest continues to improve, albeit sales are heavily incentivised. Overall, German brands continue to perform well. Sales of Vauxhall, Peugoet and Renault are continuing to struggle and depend on incentives. The market is becoming more and more polarised with far eastern companies performing slightly better than their European rivals. A high number of pre-registrations is an indicator of market uncertainty and 2013 will be challenging in the motor retailing sector. While fuel sales will remain static, demand will remain strong for fuel selling facilities.
Healthcare: Operators are educating local authorities about what defines quality care and its cost to deliver. Figures from BUPA suggest that fees need to rise by 5 per cent to 8 per cent per year for the next three years to reflect the true costs of care, amounting to an extra £1.8bn in funding. Increased domiciliary care continues to impact care homes occupancy, which fell by 0.3 per cent in H1 2012 to 88.7 per cent. Fees are down approximately 1 per cent in real terms at the end of H1 2012. Investor sentiment is likely to remain cautious as local authorities try to contain the cost of care homes, leading to tough trading conditions.
Hotels: VisitBritain forecasts that tourists to the UK will grow by 3 per cent in 2013 resulting in around 1m extra visitors. London trading performance remains strong with RevPAR for the YTD (October 2012) 4.5 per cent above last year. London transactional totals remain limited, although assets continue to sell at premium prices. Provincial performance is challenging, although YTD RevPAR is up 1.6 per cent. Improving locations include Aberdeen, Birmingham, Cambridge, Cardiff and Edinburgh, while struggling centres are Newcastle upon Tyne, Manchester, Nottingham and Swindon. In H1 2013, transactional activity will depend on debt finance while trading fill follow general economic conditions.
Recreational: Many caravan and holiday park operators reported reasonable trading last Summer, achieving at least 2011 levels. Cash flow forecasts are difficult as customers prefer late bookings. At owner occupied parks, caravan sales have fluctuated although there appears to be increased demand for used caravans. The marina sector has seen occupancy rates maintained at most locations. However, discounting is important with several marina operators willing to do deals rather than publish formal tariffs. The caravan park sector, along with golf courses, are likely to see more activity in 2013 as investors find value and banks continue to lend to the sector.
Licensed & Leisure: Managed pub operators and brewers are generally reporting improved sales, while the tenanted sector is still facing stalling or falling sales. Managed pubs’ food components continue to underpin growth in like-for-like sales. The Olympics provided a bounce for many London pubs and restaurants, although West End operators initially felt the impact of Londoners’ and tourists’ concentration being diverted eastward. ‘Pop up’ pubs and restaurants capitalised successfully on the increased demand during the Jubilee and Games while Cineworld’s acquisition of art house operator, Picture House, is further evidence of consolidation in the cinema sector. Consumers are still value-conscious and food deals provided by the managed sector remain an advantage against the tenanted sector. The lack of debt continues to hinder deals.