We have now seen the end of 2014. Now it is time to begin looking forward and anticipate what the new year has to offer. The website, Shroders Talking Point, have given their predictions for the commercial property markets in 2015. Here is a brief summary of what we found out.
They have predicted that by 2015 the market will see the total amount of returns in double figures, however we will be seeing rental growth doing the bulk of the contributing. This is mainly to do with the economy’s recent recovery and low levels of development, also supply and demand is leaning heavily towards landlords.
In regards to rental, London in 2014 had the strongest growth. This area seems to be ever growing, as the amount of people moving to London are around 100,000 a year, as it is one of the biggest employment hotspots. The office sector in central London, due to the joining of law, media, accountancy and technology companies, have managed to knock back the vacancy rates to a pre-crisis level. So this means we could see steady, if not improved vacancy rates in 2015.
With rents increased, this has caused an incline in the development side of things. This encourages companies to make a move to cheaper offices, located in other cities outside of London. There hasn’t been a strong amount of office building in London this past year, even though it seems as if more companies are beginning to relocate to the central of the city. Potentially in 2015 it looks like we could get an increase in building space being occupied.
Outside of London, in other regional cities we can see a strong demand for property, with the strongest being Manchester. Other areas such as Bristol and Edinburgh, have got some of the highest demand for office space. Whereas places like Cambridge, Aberdeen and Brighton have strong local economies, which gives them a good outlook going into the new year.
On the industrial side there has been a rise in rent by around 2% in the South East and Midlands areas. The main reason for this increase is the higher demand for builders in that area, as well as the huge progression in parcel delivery for online retail. The retail sector may not be as good of a performer. Though it may be growing, this is mainly for the online side of it. However, small convenience stores are doing the best in this sector due to retail warehouses and small basket shopping.
Certain parts of commercial real estate will potentially be the most vulnerable, this is due to the rise of interest rates in the year of 2016. One of the risks could occur if a referendum is held in 2017 regarding EU membership. If anything comes of this, then buildings within London could see an issue arise as 50% of the buildings in the city are owned by foreign investors.
In summary it seems as if 2015 will be another successful year for the commercial property industry, but with the occasional dip in certain areas.
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