TSI
US commercial real estate activity expected to be on a firmer footing in 2015
Despite a slowing global economy, forward economic momentum in the United States should keep commercial real estate activity on firmer footing, according to the National Association of Realtors. The latest NAR quarterly commercial real estate forecast says that commercial activity should progress at a gradual pace heading into 2015. ‘Solid economic growth in the third quarter proved that the second quarter wasn’t an anomaly, as business spending increased, commercial construction rose and the labour market continued to make positive strides,’ said Lawrence Yun, NAR chief economist. ‘Job growth is the catalyst to improved demand for commercial real estate leasing and new construction projects,’ he explained but pointed out that softening in the global economy will likely widen the trade deficit in the US and could trigger some weakening in the overall economy. ‘GDP growth in the fourth quarter will be sluggish at around 2% behind stalling exports. Although GDP will likely climb to near 3% in 2015, the current pace of job growth could slow and ultimately impact commercial real estate activity if sluggishness in the global economy persists,’ he added. National office vacancy rates are forecast to decrease 0.5% over the coming year due to job growth exceeding inventory coming onto the market. Improved manufacturing activity should lead to a declining vacancy rate for industrial space at 0.4%, while retail space is forecast to decline 0.2% behind a boost in consumer spending from personal income gains and lower gas prices. ‘Low housing inventory and the sizeable demand for rentals will continue to spur multifamily construction as well as keep rents rising above inflation through next year,’ explained Yun. The report includes overall projections for four major commercial sectors and analyses quarterly data in the office, industrial, retail and multifamily markets. Office vacancy rates are forecast to slightly decline from 15.7% in the fourth quarter to 15.6% through to the fourth quarter of 2015. The markets with the lowest office vacancy rates in the fourth quarter are Washington, D.C., at 9.3%, New York City at 9.6%, Little Rock at 11.6%, San Francisco at 12.2% and Seattle at 12.8%. Office rents are projected to increase 2.4% in 2014 and 3.3% next year. Net absorption of office space in the US, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to total 35.6 million square feet this year and 48.8 million in 2015. Industrial vacancy rates are expected to fall slightly from 8.8% in the fourth quarter to 8.4% in the fourth quarter of 2015. The areas with the lowest industrial vacancy rates currently are Orange County, California, with a vacancy rate of 3.6%, Los Angeles at 3.7%, Seattle at 5.8%, Miami at 6%, and Palm Beach, Florida, at 6.5%. Annual industrial rents should rise 2.4% this year and 2.9% in 2015. Net absorption of industrial space nationally is expected to total 110.7 million square feet… Continue reading
UK gross mortgage lending slows, latest figures show
Gross mortgage borrowing in the UK in October was £10.5 billion, some 2% higher than in the same month last year, and 1.3% lower than in September 2014. The latest figures from the British Banking Association (BBA) also shows that approvals have dipped. Some £9.2 billion was approved in October, down from £9.5 billion in September. Compared to the same time a year earlier, approvals in October for house purchase were down 16%, remortgaging down 21% and equity withdrawal down 34%. The total number of mortgage approvals in October was 61,097, down 2.9% from 62,900 in September. According to David Newnes, director of Reeds Rains and Your Move estate agents, believes all looks okay for next year. ‘Since the dark days of the recession the UK property market has improved unrecognisably and leaving aside seasonal factors, there is still some momentum in the pipeline for 2015,’ he said. ‘However, today’s sharper than expected slowdown underlines the need for continued support. The majority of aspiring home owners still haven’t felt the benefits of a burgeoning economic recovery, and those households still deserve a leg up onto the property ladder,’ he explained. While the Bank of England and the Government have an admirable desire for long term sustainability in the British property market, that should be tempered with a balanced look at the next six months. Otherwise, until pay packets pick up, home ownership could remain a dream for too many families,’ he added. Continue reading
Scottish rent rises outpace rest of UK
Scotland is seeing stronger annual rent growth than England and Wales, with average residential rents up 2.2% compared to a year ago, the latest index shows. In England and Wales monthly rents increased just 1.5% on average in the past year, according to data from lettings agent network Your Move. The average rent in Scotland now stands at £537 per month, back in line with the record set in August this year. Rents climbed a moderate 0.3% in the month to October, recovering from a dip during September. But taking a longer term view, the rate of growth has cooled. Annual rent rises have eased from a 3.2% increase over the year to October 2013. ‘Snags in supply and concerns over potential rent caps are setting the stride in Scotland, but in the longer term, the march of private sector rents is easing back on an annual basis. After years of consistency and incremental adjustments, rent rises quickened rapidly after the changes to lettings legislation made tenancy fees illegal. Instead of facing a one-off payment, tenants saw their monthly rents rise at a much accelerated pace. This market is only just starting to self correct and steady,’ said Christine Campbell, regional managing director of Your Move. ‘The introduction of any further lettings controls or restrictions by the Scottish government could further disrupt what was a healthy and extremely gradual rhythm of rent growth, to the detriment of thousands of renters. Complicating legislation would ostracise existing landlords and discourage new investment in the private rented sector, squeezing the supply of homes to let and simply adding to the bottleneck of the current housing shortage,’ she explained. ‘The private rented sector is the lifeblood of the economy, allowing workers flexibility and accessibility to the jobs market. Tenant demand needs to be balanced by greater availability of homes to let, to protect against unnaturally bloated rent increases,’ she added. A breakdown of the figures shows that on a monthly basis, rents are higher than September across all but one region of Scotland. The biggest month on month increase was recorded in the East, with rents climbing 1.1% between September and October. The data also shows that average rents in Edinburgh and the Lothians set a new peak of £615 per month, following 0.6% growth since September. The only region to experience a price fall on a monthly basis was Glasgow and Clyde where, the average monthly rent dropped £5 or 0.7% in the month to October, to £565. Rents have risen on an annual basis in three out of five regions of Scotland in October. Edinburgh and the Lothians have seen the strongest annual uplift in average monthly rents, rising 5.7% in the 12 months to October. This is followed by a 3.2% annual increase in Glasgow and Clyde, while rents in the East rose 2.2% over the last year. Rental prices dropped across two regions over the year to October. The average monthly rent in the South has fallen 0.5% since October 2013,… Continue reading
