Tag Archives: crisis
Office rental growth hits record highs in South East of England
Vacancy rates across the South East of England office market are at their lowest since 2001, driving rental growth to hit record highs in towns across the region, new research shows. The M25 vacancy rate stood at 5.9% in the first three months of 2015 but this falls to 4.2% when only new and Grade A space is analysed, low by London, UK and global standards, says the data from the latest office leasing report from Knight Frank. It also shows that availability fell by 13% compared to a year ago, across all grades of stock, moving the market back towards the landlord’s favour. Following the re-election of a Conservative led Government and financial market rally, economic performance of the region is improving and there is an expectation of a further boost to demand, it points out. Strong investor demand and a lack of deliverable product is holding back stock volumes in the investment market, where we are seeing a hardening of yields across the spectrum, with investors increasingly factoring in likely rental growth during hold periods. Prime yields now stand at 5.00% NIY and the combination of weight of money and lack of product is expected to drive yields down further moving forward in 2015. ‘2015 has started positively supporting our view that take up in the M25 will be almost 30% ahead of 2014, and above the 10 year average,’ said Emma Goodford, head of national offices leasing team, Knight Frank. ‘Vacancy levels are heading towards crunch point in combination the market seeing rental growth across a growing number of key centres. In some cases rents are now at an all-time high- motivation for occupiers to identify and secure the best space now. The election has removed uncertainty and will drive demand,’ she added. According to Tim Smither, head of South East investment, Knight Frank, the investment market continues to strengthen, with prime yields standing at 5% NIY. ‘We expect this yield compression to continue for the rest of the year, driven by a combination of a lack of stock, significant levels of equity looking to be deployed and anticipated rental growth in most core markets,’ he said. Continue reading
UK house prices up in all regions in April, latest RICS index shows
General election uncertainty saw new instructions fall and house prices rise in all parts of the UK in April, according to the latest report from the Royal Institution of Chartered Surveyors. House prices were driven up again in April as the data showed the third consecutive monthly decline in supply with new instructions falling at their fastest rate since May 2009, the RICS residential market survey shows. While 33% more surveyors saw prices rise in April, the highest reading since last summer, new instructions slipped to a net balance of -21%, the eighth consecutive drop in the last nine months. Moreover, the flow of second hand stock onto the market dropped in most parts of the country. Alongside this, for the first time since August 2014, respondents reported an increase in prices in every area of the UK due to the shift in tone in the London market, where 28% more respondents saw prices rise compared with 6% more surveyors in March who saw house prices fall. Near term member expectations for prices and sales continue to point to relatively modest gains, but 72% of members expect prices to rise over the course of the next 12 months. Meanwhile, in the lettings sector, there is no slowing in the growth of tenant demand, which is helping to underpin higher expectations for rents. Although anecdotal evidence suggests that these trends may have in part been a result of uncertainty ahead of the election, they are also reflective of deeper underlying problems, the report points out, adding that the downward trend in owner occupation rates across the country is a visible sign that affordability constraints bite ever deeper, as does the squeeze on household budgets from higher rents. ‘It is conceivable that the decisive outcome to the election could encourage a pick-up in instructions to agents and ease some of the recent upward pressure on house prices, but it is doubtful that this will be substantive enough to provide anything more than temporary relief. Alongside an increased flow of second hand stock, it is absolutely critical that the new government focuses on measures to boost the flow of new build,’ said Jeremy Blackburn, RICS head of UK Policy. ‘The affordability and availability of homes in the UK is now a national emergency and addressing this crisis must be the priority for the new government. The last time we were building 300,000 homes was in 1963 under Harold Macmillan’s Conservative government, which utilised both public and private building,’ he pointed out. ‘We need a coherent and coordinated house building strategy across all tenures. This should include measures that will kick start a supply side revolution, such as mapping brownfield, addressing planning restrictions and creating a housing observatory to assess the underlying economic and social drivers of housing and provide the impetus for solutions,’ he added. He concluded that introducing demand side measures such as extending Right to Buy will not see the Conservatives deliver on their promise… Continue reading
New analysis identifies rising commercial opportunities in smaller UK cities
Rising capital values and strong competition are now driving investors to look beyond the major UK cities for quality office stock and potential value, a new report shows. The analysis from global property consultancy JLL looks at the economic and office market performance of 37 smaller towns and cities giving an insight in to which locations will offer the biggest opportunity over the next five years. The report shows some smaller cities are found to have a stronger outlook than the major cities such as London, Manchester and Birmingham. It explains that the success of these smaller cities will be closely associated with their ability to develop and grow clusters of businesses, along with strong university links and the provision of integrated transport and infrastructure. Growth leaders, including Brighton, Solihull and Reading have seen capital value increases of over 25% since the end of 2012 and are expected to see a stronger than average economic performance over the next five years. With the outlook remaining solid for these cities, most of which have firmly established business clusters, JLL says it may be prudent for investors to focus on opportunities where they can reposition their assets to benefit from any price growth. The report also reveals locations such as Oxford, Warrington, Southampton and Nottingham, with a similarly strong economic outlook but where recent capital value growth has not been as strong as the growth leaders and opportunities may actually be greater going forward. These potential performers include a broad range of property markets that JLL anticipates could benefit from further capital growth as the property market continues to respond to the improving economic climate. ‘The outlook for the UK’s smaller cities is now more optimistic than it has been for some time. Our research shows potential performers, including the likes of Oxford and Warrington, should benefit from further capital growth over the coming years as the property market continues to improve,’ said Chris Ireland, chairman and lead director for UK Capital Markets at JLL. ‘Indeed, the potential for growth in some of the smaller cities may be greater than in the big six regional centres which have already seen substantial uplift,’ he added. ‘From an occupational perspective, we think there will be a gradual shift towards office rental growth in a number of these centres which should ensure continuing investor and developer interest,’ explained Ireland. According to Ben Burston, head of UK offices research at JLL, strong business clusters are a key determinant of future growth prospects. ‘For instance, Oxford’s strong life science cluster is contributing to a robust employment growth outlook, while Warrington is benefitting from a strong nuclear research and technology cluster,’ he said. ‘The devolution agenda provides an opportunity for more decision making to be taken at local level, which could help drive improvements to transport, infrastructure and public realm that will help attract people and businesses, and thereby drive future growth,’ he pointed out. Cities identified in the report as… Continue reading
