PROPERTY MARKET REVIEW OCTOBER 2017
Our monthly property market review is intended to provide background to recent developments in property markets as well as to give an indication of how some key issues could impact in the future.
We are not responsible or authorised to provide advice on investment decisions concerning property, only for the provision of mortgage advice. We hope you will find this review to be of interest.
SCOTTISH AND LONDON COMMERCIAL PROPERTY “LAG UK”
The Royal Institution of Chartered Surveyors (RICS) have reported in their most recent UK Commercial Market Survey, that in the third quarter of the year, occupier demand increased across the majority of the UK. The industrial sector was pinpointed as the main driver of improvement. Office space demand remained flat.
Contrary to this increase, central London saw demand fall for the second consecutive quarter. Scotland followed suit, showing the biggest fall in demand across the UK. In fact, 24% of the survey respondents reported a fall in demand in their region. These areas were the only two who reported that their near-term rent expectations did not manage to rise into positive territory.
Reporting on these findings, Simon Rubinsohn, RICS Chief Economist, commented: “Interestingly, the feedback we have received was noticeably more cautious in Scotland and parts of London but despite this, the RICS results do suggest that the drop in the pound is encouraging foreign investors to show interest in the market, particularly in the capital.”
GOOGLE ‘LANDSCRAPER’ LONDON HQ
In a vote of confidence for the UK, the search engine corporation ‘Google’ has submitted plans for a new UK headquarters in London that will span 92,000 square metres. When completed (with construction planned to commence in 2018) the ‘landscraper’ building will be as long as the Shard is tall, stretching parallel to the length of the King’s Cross railway platforms.
The new building will accompany Google’s current King’s Cross office, together with a nearby third building Google plan to occupy soon. The three properties combined will house 7,000 Google employees. The new building will be the first proper ty wholly owned by Google outside of the United States.
RETAIL IN ESTORS HEA ILY BIASED TOWARDS PRIME
In its third quarter 2017 ‘UK Shopping Centre and High Street Spotlight’, Savills expect cost pressures on retailers to soften in 2018 as the initial shock of weaker sterling subsides. However, the ongoing burden of business rates and staffing means the tight relationship between retailers’ margins and rental growth will make it extremely challenging for landlords to increase rents. Retail rental growth only looks likely in the strongest trading locations and the prime pitches in central London and a selection of key regional prime pitches. Retail void rates are expected to continue to fall in strong locations, delivering some net-effective rental growth for landlords.
Gentle increases in store portfolios are expected next year, with particular positivity noted amongst value retailers as consumers remain value-conscious. Expansion plans are likely to remain cautious and selective.
Shopping centre investment volumes have been subdued in Q3, as investors are targeting prime, dominant and community/ convenience schemes.
“…THE RICS RESULTS DO SUGGEST THAT THE DROP IN THE POUND IS ENCOURAGING FOREIGN IN ESTORS TO SHOW INTEREST IN THE MARKET, PARTICULARLY IN THE CAPITAL.”
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.