Outlook Bright for UK Commercial Property Market

Posted on 15 February, 2013 by Jodee Redmond

Double-Digit Returns Forecast by 2015

The UK will benefit from improving global economic conditions after 2013 and will see net trade improve as a result, according to BNP Paribas Real Estate. The firm’s global head of market economics, Paul Mortimer-Lee, recently shared his economic outlook for local and global economies. He also stated that after 2013, economic growth would average above 2 per cent in 2014-16.

The commercial property market is currently on an uphill track following a relatively poor showing in 2012. By 2015, Mortimer-Lee is predicting double-digit returns. The average annual return is expected to be approximately 8 per cent over the next five years.

Top quality retail space is expected to be the standout performer over the next half-decade. This sector is predicted to perform slightly better than Central London offices.

The outlook for high street retail shops is still muted, although it is expected to peak at 8% in 2016.

Distribution warehouses will perform well over the medium term and are expected to outperform standard industrial property.

Central London offices will continue to deliver healthy returns to investors. The West End is expected to marginally outperform the City.

High income returns will be responsible for driving a reasonable performance in regional offices, as opposed to capital or rental growth. Overall returns for the year are expected to come in at 6 per cent and are expected to peak in 2015.

The firm’s head of investment Paul Abrey stated recently that London will still be an attractive location for overseas investors, but that it will not be the sole focus. Investors will also be interested in prime retail locations and investment opportunities within the M25 that are “well let to strong covenants.”

“We also expect more speculative development in core markets this year, more asset management activity to increase returns, and for sovereign wealth funds to increasingly partner with local property investors.

“Finally, there is good news outside of London, as we expect further investment in the regions in 2013,” he said.




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