Property News Research & Forecasting Paper

Specialist Sector Snapshot

The latest Specialist Sector Snapshot from Colliers International shows that economic momentum is building in the specialist sectors with the rationalisations and refocusing of offers beginning to pay dividends.

Debt is still a burden and profit margins thin, but households continue to spend where they see good value.

The key findings were:

  • Automotive & Roadside – Insolvencies are providing opportunities to acquisitive groups, but interest is limited to profitable franchises. A ‘shake out’ of older non-prime stock is underway in the absence of further government support. Petrol stations are stable although values will fall as sales volumes contract further.
  • Recreational - Trading is generally stable, but in the absence of finance, especially in the parks sector, demand is limited to private cash purchasers who are seeking substantial discounts.
    Healthcare - The care home sector has come under scrutiny at a difficult time. Regulatory risks are rising at the same time that profit margins are being squeezed. Further consolidation is expected across the sector.
  • Hotels - London hotels recovered well in 2011 with the provinces improving more slowly. Euro weakness is a concern due to the potential negative impact on tourism. Sterling denominated assets will continue to benefit from safe haven investment flows, especially property assets such as London hotels.
  • Licensed and Leisure - Pubs continue to face stiff headwinds, but rationalisation and diversifying the offer into catering has improved trading positions. Like pubs, restaurant trading is still dependent on discounting.

Dr Walter Boettcher, Director, Research and Forecasting at Colliers International commented: “Economic momentum  is building, but disposable income growth is still limited hence discretionary spending will remain subdued with households continuing to look for value offers.

“The specialist sectors continue to be buffeted by weak confidence and falling real wages. The household savings ratio was up for the third consecutive quarter to 6.6% at end Q3 11. Real household disposable income fell by 1% and this is the sixth consecutive quarter with negative year-on-year disposable income growth. Households continue to exercise great discretion in purchasing.”

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