Rents on Central London’s top high streets jump 9% in Q4 •Prime rental values for all UK property continued to increase by 1.3% in Q4 2015 •Prime High Street rental values increased by 3.3% over the quarter, driven by the strong performance in Central London shops (Q4 9%) •The average yield for all UK property ended the year -29 basis points lower than it started
Economic outlook Steady and sustainable growth at or around trend rates for the next two years, supporting occupier demand A recovering Eurozone providing support for growth even as interest rates rise The key risk to global growth would be an unexpectedly sharp slowdown in emerging market economies (such as China) Investment Outlook Growth in investment volumes likely to flatten off, with 2016 and 2017 seeing investment at around the 2015 level Yields likely to be largely stable, but continue to fall slightly in those market segments which are later in the cycle Political Outlook A referendum on membership of the EU could overshadow real estate prospects London's Mayoral Election will deliver a Mayor opposed to Heathrow's expansion Growth outside London is likely to be spurred by the Chancellor's Northern Powerhouse initiative Office Strong employment growth will underpin office markets with sustained investment, rental growth and take-up in London and regional markets in 2016 and 2017 Supply recovery leading to lower rental growth later in the forecast period Industrial Industrials, especially secondary sheds, will be an outperforming sector even given a sustained development response Retail Although the outlook is the best it's been for many years as consumer disposable incomes rise, retailers risk erosion of profit margins through extensive structural change Hotels, pubs, leisure & healthcare A focus on operational risk and efficiency and new investors will help spur these sectors on Demographics and consumer tastes in these markets are polarising, so the "mid-market" may be a riskier place to be Student Student housing will experience continued strong demand from investors of all types but with supply side challenges in London and key student towns Residential Growth in the wider residential market will moderate Supply constraints likely to continue There are clear opportunities for the private rented sector
Ground Rent Structuring – The owners of operational businesses are increasingly seeing the value in structuring ground rent transactions which is a clear demonstration that real estate is often undervalued in operational businesses. IPO in Leisure – Investors are keen to buy into the resilience of the Leisure sector. The CBRE Specialist Markets Leisure investment team have been involved with over £1bn of transactions over the last 24 months.
This report is about the United Kingdom’s great cities beyond London. Drawing on new research and analysis, and a series of interviews with key decision makers and CBRE experts, we identify the key ingredients of city success which property market decision-makers should look out for. We show how city property markets are steadily recovering in the eyes of investors, occupiers and developers. We explain both the benefits and risks of the Government’s new devolution agenda, and explore how some of the key features of that agenda will affect city property markets.