Strong UK GDP growth in the second half of 2016 means that the economy continued to grow after the EU referendum result. Regional office occupier markets proved resilient in 2016, despite the timing of the UK’s referendum on membership of the EU. Across the ten regional city markets monitored by CBRE, overall take-up in 2016 was 5.6 million sq ft, just 3% below the five year annual average. UK regional office investment reduced in 2016 was still strong compared to the long term average. Approximately £3.9 billion was spent on offices around the UK, beyond London and the South Eastern regions according to analysis of deals recorded by Property Data. Weaker sentiment will have some impact on UK property pricing, but as yet there is insufficient evidence on how significant that impact will be. Fairly priced stock will continue to sell and there will be ongoing interest in markets which continue to trade at a discount to London and the South East.
• CBRE’s 2017 Outlook report provides a comprehensive overview of the key trends affecting UK property markets in 2017. Alongside core sections covering the economic, political and investment outlook there is coverage of every major investment and occupier sector. • There is an improved global economic outlook, but inflation is now a more significant risk than previously. There is less concern about emerging markets. • UK GDP growth is expected to slow to 1.4% in 2017 due mainly to Brexit-related uncertainty and a tighter labour market. • The Brexit process will mean a very uncertain 2017, with some volatility in markets expected even if the underlying economy is performing well – not least when Article 50 is served. • 2016 investment volumes likely to be 30% down on a very strong 2015, with 2017 slightly weaker than 2016.
2016 was a record year for logistics take-up, with 29.35 million sq ft of space acquired for occupation, around 10 million sq ft ahead of the previous long-run average Online retailers have been particularly active during the past year, accounting for almost 30% of take-up. Nevertheless, despite the dominance of this sector, take-up would have still been ahead of its long run average with the space acquired by other occupiers We also saw out-performance in the investment market with a total of £2.75 billion invested into single asset logistics units, a return to the investment volumes last seen two years ago Logistics assets also outperformed all other forms of commercial real estate during 2016. According to the CBRE UK Logistics Index, modern logistics properties experienced a total return of 8.6%
Prime UK commercial property rents increase 0.4% in Q4, 3.7% in 2016 Rental values in UK prime commercial property increased by 0.4% in Q4 2016, bringing annual growth to 3.7% for 2016. Prime yields remained relatively flat, falling by -1bp to 5.4% in Q4. Overall, prime yields increased by 11bps over 2016 for All Property.
Take-up in January 2017 was 0.5m sq ft, a large monthly fall due to high levels of take-up in December, this meant take-up was 49% below the 10-year average. Availability fell marginally to 14.1m sq ft, 4% below the 10-year average of 14.7m sq ft. The level of under offers rose by 9% over the course of the month to stand at 2.2m sq ft, but were 23% below the 10-year average of 2.8m sq ft. The largest deal of the month saw COS Stores acquire 60,100 sq ft at 1 New Oxford Street, WC1.