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Rent increases likely to be muted in the UK in 2015, it is predicted
Market conditions, combined with the likelihood of interest rate rises and uncertainty over the general election is likely to result in static or low rental increases in the UK in 2015, it is claimed. Rental rises are likely to be restricted by factors such as continued low disposable income, anticipated interest rate rises and a forecast of economic development in 2015 that is expected to be lower than this year, according to the forecast analysis from Belvoir Lettings. A review of the year shows that rents have not changed much since 2008. When the firm first started tracking rents in March 2008 they were £698 per month, fell to £678 in 2009 and fluctuated around this level until 2014 when they reached £691 per month. ‘On average, after seven years, Belvoir offices that have traded consistently have seen little or no growth in rents, albeit there have been falls and rises during this time. For the Belvoir group however, average rents have risen due to an increase in the number of new offices joining Belvoir in higher rental areas south of the Midlands,’ said Dorian Gonsalves, Belvoir's director of commercial and franchising. Rents for the whole group, including new offices, were £707 per month in 2008, recovering to £715 per month in 2012 and 2013, seeing an annual average of £735 per month year to date, a 4% rise for the group over the last seven years. Regionally, in England, rents vary from £570 in the East Midlands to nearly £1,500 per month in London. The majority of Belvoir offices in Scotland are either seeing rents flat or slightly falling outside of Edinburgh and Aberdeen, with rents ranging from £500 to just over £600. In Wales, rents have been relatively static since offices opened, with average rents varying from just over £500 to £700 per month. Belvoir's research shows that over the last seven years London rents are up around 20%, while the South East is up 7%, West Midlands 6% and Yorkshire up 3%. Rents in the South West are on a par and rents in East Anglia have nearly recovered. In contrast, rents in the East Midlands are still 5% lower while in the North West they are down by 4% versus 2008. Year on year, rents are up in most areas, reflecting the tightening of stock levels versus high demand and better economic performance, which helps tenants to afford to pay more rent. However, areas such as Yorkshire, the North West and East Midlands have seen a fall year on year, suggesting the North/South divide in England is impacting on rental performance. ‘From a sales and property price perspective, this year saw a continued recovery of the property market. However, price rises and recovery were driven largely by activity in the London and the South East, said Gonsalves. ‘After 18 months of rapid growth, the rise in London seems to have… Continue reading
Rapid price growth slowing in many US markets, latest index shows
Rapid property price growth in the US continued to level off in the second half of 2014, but markets hardest hit by the recession are still seeing double digit value growth, the latest data shows. Cumulatively, US homes will be worth $27.5 trillion at the end of 2014, a 6.7% increase overall, according to the latest data from real estate firm Zillow. In November national home values continued to rise at an incrementally slower pace and are up 6% from last year, the third consecutive overall increase. Homes lost $6.1 trillion in value between December 2006 and December 2011. The cumulative increase in home values is slightly smaller than the 8% recorded in 2013 and that kind of gradual slowing is a sign of the times as the market heads for slower expected gains in 2015. Over the second half of 2014 inventory increased in many US markets and, with more homes on the market, home value appreciation slowed. ‘Looking at the total value of the US housing stock proves just how huge and important the housing sector is to the overall economy,’ said Zillow chief economist Stan Humphries. ‘Virtually nowhere else will you see gains of more than a trillion dollars in one year represent only single digit percentages of the total market. As we conclude 2014 and look ahead at 2015 and beyond, housing will play a bigger role in the broader economic recovery,’ he explained. ‘As the job market improves and more households form, more people will search for homes to buy and rent, which will translate into more people buying appliances and home goods and lead to more jobs for home builders and contractors. Housing is well positioned to continue the great strides already made this year,’ he added. Looking ahead, as more homes come on the market, growth in home values is expected to slow to 2.4% in the next 12 months, according to the Zillow Home Value Forecast. There were 11.8% more homes for sale in November 2014 than a year prior, but inventory fell slightly in many major markets from October to November. Among major markets, home values were up the most year on year in Miami with growth of 13.6%, up 12.8% in Atlanta, up 11.9% in Houston, up 11.9% in Orlando and up 11.5% in Las Vegas. Values were higher than last November in almost every major US metro and national rents were up in November from a year ago by 3.4% to $1,342. Continue reading
Positive outlook for UK regional commercial markets
UK regional office markets have seen subdued rental growth over the last few years but the outlook is now more positive as a broadening economic recovery is feeding through to improved occupier demand. This together with the diminishing availability of Grade A stock and lack of significant speculative development completions over the last few years is driving rental growth across the regions, according to the latest report from Knight Frank. The real estate firm expects to see strong rental growth in the majority of regional city centres over the next 12 months, with new development completions securing higher prime rental levels. Manchester, Birmingham, Newcastle and Aberdeen will see the strongest growth while all other centres, apart from Sheffield, will see positive growth. Prime headline rents in Manchester and Aberdeen are expected to reach record highs of £34.00 per square foot by the end of 2015, representing corresponding increases of 10% and 6% over the year. Birmingham offices will also see rents rise by 8% to a seven year high of £32 per square foot. While there is unlikely to be any rental growth in Sheffield in 2015, Sheffield rents are expected to rise more sharply up to £22 per square foot by the end of 2016. Given the diminishing availability of Grade A stock and lack of developments, vacancy rates are likely to fall or at least remain stable, with the exception of Aberdeen where the level of speculative development is higher, the report points out but the firm is also anticipating a slight softening of incentives over the next 12 months. ‘As economic growth spreads to the regions we expect to see prime office rents rise across regional city centres in 2015. Lack of supply at the prime end of the market will add further upward pressure on both prime and secondary rental growth,’ said Louisa Rickard, associate, commercial research, Knight Frank. According to James Robert, Knight Frank’s chief economist, office rents will rise across regional city centres in 2015. ‘Lack of development to date could quickly migrate growth from prime to secondary,’ he says in the firm’s latest UK market outlook report. He explained that while the punchy rebound seen by commercial property in 2014 is encouraging, the recent figures from IPD are not sustainable in the long term. ‘The total return numbers may accelerate a little further, but we expect them to drop back early in 2015, perhaps picking up again in the autumn on rental growth. This will be due to slower capital growth as investors acknowledge that prices have rebounded from the double dip period. The slow and methodical business of increasing value by asset management then begins. Note though we are predicting a deceleration not a decline,’ Robert said. ‘A year ago one could only speak meaningfully of rental growth in central London, but in 2014 we saw it re-emerge for prime in many M25 towns, Birmingham, Glasgow, and Leeds. The economic recovery… Continue reading
