27th April 2017
Roger Hannah
Last year the British population experienced a highly eventful year. With huge political changes going on within the country, the Brexit decision sent waves through the world’s economy. Now with the triggering of Article 50, a snap election and possible events in neighbouring countries such as elections in France and Germany – signs for a calmer year are seeming unlikely.
What we’ve learnt then so far is uncertainty seems to have followed us into 2017 and it will continue for the remainder of it. What this does do, however, is bring some form of certainty when it comes to the property investment markets. With continued changes and announcements, key investors are highly likely to target secure income streams as their main focus – shifting their attention to sectors where the fundamentals of supply and demand are insulated by political and even economic events.
As a result, it means that some predictions can be made in terms of what will continue to happen to the British commercial property market for the remainder of the year.
Confidence to Remain in the UK
With unpredictability remaining present across the globe, the heightened demands from pension funds and low bond yields, it will mean that the worldwide search for secured income investment will continue to be key. Therefore, this will lead to more need for UK properties such as index-linked warehouses, ‘alternative’ assets classes and long-let city offices.
Rise in Non-Domestic Investors
The drop in the pound has made the UK a more logical and particularly lucrative market for foreign investors – especially the ones who pulled in by income streams from strong rental covenants and longer leases. With major builds commencing in UK cities such as London and Manchester, the next years for the nation are likely to see record levels of non-domestic investment.
The Continuation of Tenant Movement
As you’ll have already gathered following Brexit there is no set-in-stone timetable for the final move with political movements continuing to remain ambiguous. As a result, tenants won’t be able to hold off moving decisions forever. They will more than likely request added flexibility when negotiated new leases, however, these occupiers will continue to search for new space. With a lowered supply and limited development forecasted in certain cities, this will cause them to keep their office markets afloat.
Logistics Still Crucial
With countrywide availability in space at all-time lows and demand unaffected by wider issues, logistics is set to continue to be crucial and ultimately, perform better than the rest of the market because of its long and typical indexed leases – not to mention the landlord-friendly nature of the occupational market.
Ease and Experience Key to High Street Success
A noticeable factor that we’ve seen hold true since the year start is that retailers are adopting an ‘omnichannel’ strategy. Despite investor worry regarding the impact of the digital selling on physical stores, experienced investors have adapted with the times and are now looking for the best ways to meet all of their consumer’s needs. This has proved profitable and those waiting on the sidelines will need to offer improved levels of convenience if they are to succeed.
A Drop in Development Activity
A lot of borrowers and lenders will turn away from investing in new projects due to the related market risks. With that being said, with office space running tremendously low in many markets, there is a huge investment opportunity for those who do decide to go ahead with new projects – an investment that they could very well reap the rewards from.