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Property Snapshot

The latest Property Snapshot from Colliers International shows that corporate activity may be turning, but it is too early to call it a trend.

Sentiment is improving with anecdotal evidence from several professional firms suggesting an uptick in M&A activity. The groundwork for stronger economic performance later in 2012 may be in the early stages of preparation.
The key findings were:

  • Investment - Transaction levels remain limited as investors take stock, revisit strategies and refocus on core assets. Real estate finance remains absent with few signs of improvement. Capital values are stable, but being tested, including prime.
  • Retail - Retail sales figures are improving, but further administrations are expected, rents are falling and landlords continue to brace themselves for further stress.
  • Offices - City rents are stable, although demand is flat in the prime 100,000 sq ft+ segment. West End availability is tight and interest in non-core areas is increasing, as are rents. Regional centres are seeing greater activity.
  • Industrial - Leasing demand and development remain off the pace due to uncertainty. The development pipeline remains very limited.
  • Residential - House prices are generally stable, with modest declines expected in 2012. Lending volumes continue to improve slowly with many potential first time buyers locked out. Private landlords are seeing rental growth. Foreign interest will support prime markets, increasingly outside of London.

Dr Walter Boettcher, Director of Research & Forecasting at Colliers International commented:

“The components of GDP growth for Q4 11 show that business investment is the principal constraint on recovery. Capital formation and inventory growth fell by 2.8% and 0.8% q/q respectively, offsetting positive contributions from export and household spending at 2.3% and 0.5% q/q. Moderating inflation expectations may be supporting household spending.

“Despite January’s improved inflation figures (CPI and RPI registered 3.6% and 3.9% respectively with core inflation down to 2.7%), weak sterling, political turbulence in the Middle East and the consequent surge in oil prices is acting to undermine confidence. Brent spot prices denominated in sterling remain very high and UK energy price inflation has been in double-digits since September 2011, registering 16% y/y in January 2012.

“UK economic sentiment should continue to improve, although Eurozone developments and worries about an oil price shock are impacting on confidence.”

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