Tag Archives: european
Annual property rental values in prime central London fell last month
Annual rental value growth in the prime central London residential property market eased to 0.7% in December on the back of falling demand in the financial services sector. Rental values fell 0.4% from November, taking the annual rate of growth to its lowest level since July 2014, according to the latest analysis report from real estate firm Knight Frank. However, Tom Bill, head of London residential research at Knight Frank, explained that there is also an element of seasonality and a quarterly drop of 1.1% in the last three months of the year was the weakest since December 2014 and repeats a pattern of previous years. Rental value growth peaked in May this year at 4.2% and the subsequent decline has resulted in prime gross rental yields dipping from 2.96% to 2.93% over the same period, the report says and demand has fallen over the last six months as a number of banks have implemented restructuring plans. ‘European banks in particular have been slower to cut jobs than their US counterparts following the financial crisis. Profitability has fallen due to new regulations that force banks to hold more capital, which has contributed to job cuts at European banks that have been in excess of 100,000 in recent months,’ said Bill. ‘As well as the macroeconomic backdrop, including uncertainty over China and falling commodity prices, the situation is compounded by the fact many large European banks have new chief executives, who typically take a more radical approach to cost savings in the early stages of their tenure,’ he pointed out. ‘The result is that optimism at financial services companies fell markedly in the third quarter of this year across a range of sectors. However, there have been signs of stronger demand from boutique financial services companies like private equity businesses and hedge funds as clarity emerges surrounding the level of 2016 bonus packages,’ he added. The report also says that demand at the super prime level of £5,000 plus per week remains strong as uncertainty continues to surround taxation and price growth in the higher price brackets of the sales market. ‘Equally, demand remains strong in lower price brackets among workers of all professions, bolstered by the strength of the UK’s economic recovery,’ Bill said. Continue reading
UK commercial real estate performance set to be more polarised in 2016
After a strong 2015 experts expect the performance across different parts of the UK’s commercial real estate sectors to be more polarised over the next 12 months. According to the latest analysis from Schroders it has been another good year for UK commercial real estate and unleveraged total returns are likely to be close to 15%. One of the keys to success in 2015 was rental recovery. The report explains that whilst one of the drivers was a continued favourable fall in real estate yields, the key difference to 2014 was a broad based recovery in rental values. While central London offices have led the upswing, several other cities including Brighton, Bristol, Cambridge, Manchester, Leeds and Oxford have also seen a significant increase in office rents. Likewise, industrial rents rose in many locations, boosted by growing demand from on-line retailers and parcel couriers. In contrast however, the retail sector is still adjusting to a world of multi-channel sales, the report adds. While there are pockets of rental growth in London and some tourist destinations, most centres have a significant amount of vacancy and rents were either flat, or fell slightly in 2015. The outlook for 2016 is already categorised by some commentators asking whether we are now at the top of the cycle. Schroders' head of real estate, Duncan Owen, explained that the income from commercial real estate has historically been very stable, but capital values have been cyclical. However, capital values have risen by 25% in less than three years and there is sentiment that cannot continue. ‘This sentiment is understandable, but not necessarily rational. The immediate trigger for previous downturns has been a recession, which has depressed rents and pushed up real estate yields as investors have withdrawn from the market and liquidity has dropped,’ said Owen. ‘In addition, commercial real estate has had a habit of contributing to its own downfall, either through excessive borrowing which inflated prices such as from 2005 to 2007, or because of a boom in development which left an oversupply of space, for example from 1988 to 1990, and falls in rents,’ he added. He believes that none of the usual suspects appear to yet be evident currently. ‘Looking at the economy, the outlook is positive and the consensus is that UK GDP will grow by 2.25 to 2.5% through 2016 to 2017. The main reason for being optimistic is that the UK is finally seeing a recovery in productivity, which should support a steady increase in real disposable incomes and consumer spending. Furthermore, exporters stand to gain from faster growth in the rest of the European Union, which accounts for 45% of total exports,’ Owen pointed out. His analysis also points out that there are few signs of excess borrowing. ‘In general, banks and other lenders have continued to take a disciplined approach to commercial real estate and although total loan originations in 2015 are likely to be around £50 billion, they are still… Continue reading
New generation of skilled builders needed to fulfil UK’s new housing plans
A new generation of skilled builders will be needed to fulfil the UK government’s latest pledge to build hundreds of thousands of new homes, according to industry experts. The house building industry has welcomed the announcement of a £7 billion fund to prioritise home building with 200,000 starter home with 20% discount for those aged under 40, 135,000 shared ownership home, 10,000 rent to buy homes and 8,000 specialist properties for the elderly and disabled. But the Federation of Master Builders (FMB) pointed out that already developments are being stalled or held up due to the cost of hiring skilled tradesmen and with a shortage of apprenticeships the skills problem is not about to go away. ‘Unless we see a massive uplift in apprenticeship training in our industry, there won’t be enough pairs of hands to deliver more housing on this scale. The Chancellor clearly recognises that the crisis of home ownership is inextricably linked to a crisis in house building. We therefore hope that in order to address both, the Government will do everything it can to increase house building capacity,’ said Brian Berry chief executive of the FMB. ‘SME developers will have an important role to play in delivering the smaller scale sites across the country. The last time we built in excess of 200,000 homes in one year was in the late 1980s when two thirds of all homes were built by small developers,’ he pointed out. ‘SME house builders now only build little over one quarter of all new homes which points to another serious capacity issue as we need more small house builders to enter the market and also for SME house builders to crank up their delivery of new homes in order to build the Chancellors 400,000 new affordable homes,’ he added. There was much in the Autumn Statement for the construction industry to be excited about but some of the fundamental barriers to house building and, in fact, construction of any kind, remain in place, according to Simon Craven, director at Tower8. ‘If we are to see spades in the ground, then we need to see more of skilled workers to deliver these grand schemes. Further funding for a skilled workforce is required if the construction industry is to match the potential projects that the Chancellor is so keen to encourage,’ he explained. ‘Pressure on the construction industry comes from project costs such as staffing, materials inflation and other key factors that affect delivery. The Chancellor has left many of the problems of supply side and skills to the private sector to resolve which is a potentially exciting move. But the grey area occurs where the private sector works with local authorities, planners, education and divergent goals between these parties mean that the progress required is simply not made,’ he added. 'Furthermore, we have been interested to speak with many of the firms that are looking to deliver PRS schemes in the… Continue reading
