Property News Research & Forecasting Paper

Property Snapshot

The latest Property Snapshot from Colliers International shows that transaction levels across the industry remain very limited.

Leasing markets are buffeted from on-going economic uncertainty and investment markets are impacted by pricing uncertainty and lack of finance. The report also reveals that retail landlords are bracing themselves for stress as retails sales levels and rents continue to fall and administrations take a toll.

The key findings were:

  • Investment - Transaction levels remain very limited as investors take stock, revisit strategies and refocus on core assets. Real estate finance remains absent. Prime yields are stable, but being tested; secondary is weakening.
  • Retail - Retail sales figures have weakened, further administrations are expected, rents are falling and landlords continue to brace themselves for stress.
  • Offices - City rents and incentives are stable as demand remains patchy. West End availability is tight as interest shifts to other sub markets where rents are increasing substantially. Regional centres are quiet, but poised for a strong second half.
  • Industrial - Leasing demand and development, especially for large scale facilities remain off the pace due to uncertainty. The development pipeline remains very limited and lack of quality space is hindering the market.
  • Residential - Modest house prices declines are expected in 2012, with some knock on effects from tax changes on top end properties. Foreign support for London prime will be tested as other world cities provide alternatives.

Dr Walter Boettcher, Director of Research & Forecasting at Colliers International commented: “Underlying UK economic performance remains flat with a revised Q4 11GDP growth figure of -0.3% q/q likely to be offset by Q1 12 growth of 0.3% q/q, assuming that the latest positive PMI indices do not mislead. The UK Budget was neutral, although it is seen as pro-growth and has support from capital markets. Eurozone worries have eased on the back of the ECB’s injection of €1 trillion into the European banking system; many problems remain though.

“Inflation continues to moderate despite increased energy costs with CPI and RPI down in February for the fifth consecutive month to 3.4% and 3.7% respectively; core inflation has fallen to 2.4%. There is little evidence of wage push inflation as real wages contracted at an annual rate of 3.2% in January, suggesting scope for further quantitative easing to stimulate growth.

“UK economic sentiment continues to improve despite the minor downgrade to Q4 11 GDP figures. Stronger data from the US, positive Eurozone developments and the UK budget have brought greater stability and strengthening sentiment.”

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