Worldwide property asset manager Henderson has been casting its international eye on the UK commercial property market, pinpointing Central London as a growth location for investors.
Among the positives for London, says Henderson, is its global exposure, offering opportunities to diversify from domestic concerns. Weak sterling is encouraging tourists to spend, and the 2012 Olympics are expected to provide a further boost to London’s retail and leisure sectors.
The research forecasts that London’s economy will grow by 3.8% per year, in contrast to 2.5% across the rest of the UK.
In retail, Central London commercial property rents are predicted to grow by an average of 3.5% per year for the next five years. A combination of high retailer demand and lack of suitable space will mean commercial property landlords can expect to be ‘reaping the benefits’, said one Henderson analyst. The prospects for office space, despite potentially greater volatility, are seen as similarly positive by another: ‘London office jobs growth should still improve gradually over the next few years and London should be a key beneficiary of the faster growth in global economic activity.’
The report comes after the announcement that commercial property developer Land Securities will be investing a reported £275m in retail developments, aimed at satisfying demand in particular areas of the commercial property market.
Opportunities are believed to exist ‘higher up the risk curve’, where commercial property may not be in prime areas ‘but where supply and demand influences are nonetheless compatible with rental uplifts’ and can be acquired at a discount, according to researchers.
Optimism for London’s office space comes from CB Richard Ellis, which expects the capital to be one of the few European office markets to witness an imminent upturn in development. The commercial property advisers reportedly expect a tripling in completion of office schemes in 2013, compared with 2011 (though as we all know that’s not a particularly big figure to top!).
