By +Eric Jafari
property will experience a strong 2013 across most market
segments, with rental growth driving returns. This is the
prediction of Jones Lang LaSalle, which claims things are starting
to look up for UK real estate.
Forecasts have indicated all-property returns will reach 4.6 per
cent this year, compared to 3.4 per cent recorded in 2012. Over the
five-year forecast period, average returns increase to 6.2 per
cent. However, this is still lower than long term averages,
indicating there must still be caution when entering any market -
the days of the boom are yet to return.
The strongest returns can be found in the office market, at 7.1
per cent per annum. This is primarily driven by units in central
London, but increases will be noted throughout the country, perhaps
indicating a return of business confidence. The industrial sector
will also perform well over the five-year forecast period, with
average returns of 6.2 per cent. Distribution Warehouse will prove
to be the most lucrative market.
Unsurprisingly, the Retail sector is expected to take another
hit, with weak returns resulting from a poor 2012 performance.
Shopping centres are lagging behind the most, but from 2015
onwards, the industry is expected to experience a recovery, thanks
to a stronger economy. However, in the near-term the market will
remain subdued, as the financial crisis continues to constrain
consumers. Nonetheless, rents will remain stable, with the
five-year forecast remaining below its long term trend. Retail
warehouses will perform better than most sub-sectors, with rental
growth averaging 1.7 per cent per annum.
Jones Lang LaSalle believe returns will be driven by rental
growth in the long term across all sectors, with yields remaining
stable. However, this won't begin to kick in this year. Andrew
Burrell, head of forecasting at Jones Lang LaSalle, said: "Another
weak year is forecast for rental growth, aside from London offices.
Economic recovery brings an upturn from next year, but even then
increases lag inflation over the longer term."
08 April 2013
Commercial Property Leasing