Overview and Predictions of the Real Estate Market
Posted on December 19th 2016What a 12 months we have had, a Brexit referendum, changes in a Stamp Duty rates and the prospect of real uncertainty in the European elections next year, as someone would say a year of “expect the unexpected”.
Occupiers in all sectors are still assessing the impact of the referendum on the future paths for their businesses. As the realisation grows that the negotiations on how we exit and then trade with the EU will be long and bumpy, businesses are continuing making their decisions.
Despite the uncertainty, commercial property continue to attract strong demand and remains a fundamentally safe asset, giving strong income returns. As commercial property assets with long lease structures and strong rental covenants will continue to attract attention, while institutional investors are interested in the residential portfolios which are expected to continue to grow.
In relation to the tenants, tenants will continue to demand greater flexibility when signing leases but occupational demand will be maintained.
In relation to the lender and borrower, it is more likely that the risk aversion will lead to 1/3 fall in the development activity across all sectors and regions, challenging tenants with forthcoming lease events but representing an opportunity for developers prepared to press ahead with projects.
In it is worth to mention that specific opportunities are available in logistics warehouses in strong locations such as the Midlands and the M25 area. With availability at record lows and demand unaffected by the uncertainty, this sector looks likely to continue to out-perform the rest of the market due to its long and often indexed leases, as well as the landlord-friendly dynamics in the occupational market.
It would be expected that the pound will remain comparatively weak throughout and after the Brexit negotiation process. This, combined with the income security that the UK lease offers, will stimulate aa steady rise in non-domestic interest in commercial property in the UK.
Nevertheless, the unexpected political events of 2016 will lead to a rise in caution and risk aversion among real estate investors in 2017, making secure income streams more highly prized among core investors globally. This is expected to benefit the UK market, where high levels of transparency and stable legal structures make real estate a safety play.
For further information please contact Helen Washington on h.washington@wjclaw.co.uk.