Improving Economy Boosts Commercial Property Market

Posted on 7 August, 2013 by Neil Bird

The UK’s improving economy is having a positive impact on the commercial property market with the recovery now extending beyond London and the South East to regions that have been lagging behind.

With more upbeat news emerging on a monthly basis it appears the return to economic growth may be more sustained than many commentators were prepared to speculate only a short time ago.

Yesterday the Office for National Statistics (ONS) reported that manufacturing output had risen by 1.9 per cent in June. This was twice the level of growth analysts had been expecting.

This was the latest in a series of encouraging reports. Recently the British Retail Consortium (BRC) revealed that the July heatwave had led to the biggest year-on-year sales boost in seven years. In addition July was the third successive month of retail growth.

July was also a good month for the automotive sector according to the Society of Motor Manufacturers and Traders (SMMT). A total of 162,228 new cars were registered during the course of the month, a rise of 12.7 per cent on the previous year. There has also been growth reported in the service sector and the construction industry.

In addition to these figures, the Halifax this week reported that the housing market is continuing to grow. In the three months to July prices were 4.6 per cent up on the same period last year. An increase in market liquidity was also reported.

So what impact are these statistics having on the commercial property market? To answer this question it’s important to remember that wider economic indicators are always reflected in the market. With an upturn comes increased business demand and this, in turn, gives investors the confidence to expand their portfolios. And judging by the stories from around the country this is precisely where the market is right now.

In the past week alone the commercial news pages of various print and online publications have reported that demand is growing and returns are at a two year high.

What is even more encouraging is that many of these reports are coming from areas like the North West and the East Midlands, suggesting that the regional markets are also benefitting from the improved economic outlook.

This view is supported by figures from CBRE which recently reported improving conditions in the regional office markets and overall commercial property rental growth during the second quarter.

“These results show that a more widespread recovery in the UK property market is starting to become apparent.

“After a long period during which rental growth and falling yields have been confined almost entirely to London and the South East, Q2 has seen more positive performance in the rest of the UK.

“This more positive trend in the UK real estate sector is in line with what is also being reported in the economy generally, through business surveys and other data,” said CBRE’s Aleksandra Starczynska.

Collectively this upbeat news might be expected to raise consumer confidence and provide a further boost to the economy and, subsequently, to the commercial property market. However, some commentators are still urging caution and family budgets remain stretched due to years of wage freezes.

Despite this, it appears that the worst may finally be over, enabling businesses, consumers and investors to look to the future with greater confidence.




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