By Adam Cornbloom
With our real estate market update we are pleased to provide our clients with a helpful insight on the UK property markets.
OFFICE OCCUPANCY: STRONG GRADE 'A' DEMAND IN THE CITY
Carter Jonas report an increasing trend of tenants favouring new Grade 'A' office spaces in the City of London, over 'second-hand' premises. This is reflected in increasing relocations from Midtown and the West End into new office spaces in the City, where demand seems to be outpacing supply. Despite this, Carter Jonas expects City office rents to fall by up to £2.50 a square foot during the remainder of this year, in the face of continued Brexit uncertainty.
It is worth noting the impressive new 22 Bishopsgate is 20% let or under offer, despite the fact the building is not due for completion until Q4 2019 - something of a vote of confidence in the City.
REGIONAL LAND VALUES: ROBUST
Land values for undeveloped green and urban sites across the UK increased by 0.2% in the first quarter of 2019, with the West Midlands seeing the highest increases of 0.6% in this time.
In terms of volume, Savills report the number of undeveloped sites sold in the Midlands, the North and South Wales in the first quarter of 2019 was at or above 2018 levels. Meanwhile there are signs of declining appetite among housebuilders in London and the South. This likely reflects falling prices in the region generally and the Government's plan to end the 'Help to Buy' scheme in 2023.
INDUSTRIAL MARKET: CONTINUED HEALTH
Strong rental growth in industrial properties has boosted the already healthy returns being seen in this sector. JLL reported average rental increases of 8% in 2018 and total returns averaging 15.5%.
At the beginning of 2019 JLL reported 12 million square feet of industrial and logistics floorspace under construction across the UK. However, most of this comprises 'big box' spaces above 100,000 square feet, and stock levels of sub 100,000 square feet space remains relatively low which could drive further rental increases in this area.
The general picture of strong demand and modest supply means industrial properties continue to outperform other commercial property investments at this time.
RESIDENTIAL PROPERTY: PRIME LONDON DECREASES SLOW
The fall in prime London residential prices has appeared to slow in the first quarter of 2019 to 0.3%. This still represents a decrease of 2.5% in the last 12 months but could perhaps point to the market beginning to steady.
It is of course worth remembering that prime Central London property prices are on average down 19.4% from the 2014 peak. Some investors will consider current prices represent good value, and Savills have reported increases in applicants and viewings in the first quarter of this year. However, activity continues to be stymied by low levels of stock and purchasers delaying decisions until after Brexit; though limited stock levels in Central London should act as a buffer against further significant price falls.
Looking at residential prices generally, Land Registry figures released on 20 March 2019 show an increase in house prices across England of 1.5% on the preceding 12 months. Drilling down into the regions, London has seen a decline of 1.6% in this time and the biggest gains have been seen in Wales, the East Midlands and the North West.
For further advice, or to discuss your cases generally, please contact Adam Cornbloom.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute investment or legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.