Activity levels across occupier and investment markets were up modestly again in March. The City leasing market in particular seems to have gained a bit more momentum as potential tenants worry about the future availability of Grade A space. Regional city office markets also seem to be following a similar theme.

Q1 13 GDP figures will be released next week and most observers expect a flat growth rate, at best. Hopefully the news will not damage gradually improving sentiment in property markets.

Colliers International UK Property Snapshot April 2013:

  • Residential: The Help to Buy Scheme introduced at the Budget looks likely to build on the positive impact of the Funding for Lending Scheme. March has also seen Prudential announce their entrance into the private rental market with the purchase of 500 new homes; Aviva and L&G are both expected to follow suit.
  • Offices: Across the UK the supply of Grade A office space in city centres is disappearing and rental pressure as a result of this is already apparent. Within Central London demand for offices is also increasing.
  • Investment: Investment activity has risen from £2.2bn in February to £2.8bn in March, although the total Q1 13 figure remains level with Q1 12 at £6.7bn. Interest in regional retail and industrial assets continued throughout March, with Central London investment seemingly focused on office redevelopment opportunities.
  • Retail: Retail sales were up 3.5% y/y, however this increase has had to be fuelled by discounting as real wages have again fallen for the 34th consecutive month. Rental recovery outside of London does not look near, although the rate of decline is slowing.
  • Industrial: The distinction between industrial and retail property continues to blur; Morrisons is in talks with Ocado about sharing their distribution network and the opening of two ‘dark-stores’. Dark store expansion is a priority for most of the big chains with the online food market expected to double in size by 2017.

 

Walter Boettcher, Chief Economist and Forecaster for EMEA at Colliers International, said: “Investment transaction levels continue to increase slowly. Given the limited amount of prime product being offered to the market, this suggests that investors are looking increasingly at alternative asset classes and higher yielding properties. Pricing on non-prime assets also appears to be more responsive to investor perceptions. Look for a further increase in transactional activity in Q2 13.”