Demand for logistics warehousing the UK has been exceptionally strong in H1 2016, with a total of 13.45 million sq ft of space acquired for occupation. This is up sharply on the 9.5m sq ft achieved in H1 2015. Online retailers have been notably active this year, so far accounting for 18% of total take-up. Other retails, those with a physical store network, accounted for 31% of overall take-up. With a 42% share of take-up in the first half, the Midlands was the focal point for the bulk of activity in H1. The South West, at 18%, also took an above average share due to a number of pre-commitments from retailers on sites at Avonmouth. Echoing the occupational market, investment activity has also been strong with £1.19bn of sales of logistics properties in the first six months of 2016. This is 55% of the full year 2015 total.
H1 2016 UK Office Market Overview - key takeaways: UK GDP forecasts have been revised down following the EU Referendum result. However, the outlook is still one of growth, albeit at a slower rate. A recession is not anticipated. The market and the economy is very much sentiment driven at the moment, which can make firm predications difficult. There was a varied picture of occupier demand in H1 2016 in the core regional markets. Some cities have had a strong start to the year, whereas others have struggled relative to recent past performance. Cities with improved levels of take-up this year, compared to 2015, include Bristol, Glasgow and Liverpool. Against each city’s five year average Birmingham, Edinburgh and Southampton can also be added to the list of cities performing above trend over the course of the last six months. Transaction activity is continuing. Few occupier deals have yet been lost due to the EU Referendum result. The only exceptions are a few deals where ‘Brexit’ is being cited as the explanatory factor for pulling out of a transaction – but in fact there was some other underlying issue. Investor appetite for regional office markets was surprisingly strong in H1 2016, with approximately £2.2 billion spent on offices around the UK, beyond London and the South Eastern regions.This level was around £200 million up on the first half total of 2015. Given uncertainty around the political and economic outlook it is not surprising that some market participants have put major decisions on hold until there is more clarity and evidence of any impact on property pricing. However, good quality real estate with a long, secure income stream (which is exactly what property funds invest in) is likely to remain attractive to investors.
On Thursday 23 June the UK population voted by 51.9% to 48.1% to leave the European Union (EU). Turnout was 72%, with a record 46.5 million people eligible to vote, causing Prime Minister David Cameron to resign. In voting to leave the EU, the UK has made probably its most profound economic and political decision in 60 years – a decision seemingly reflecting our identity as a nation, our values, our dissatisfaction with the EU economic and legal model, a rejection of integration and globalisation, and dissatisfaction with ‘the establishment’. But what happens next, and what does it mean for real estate? In this note we sketch out some of the big issues to watch.
UK prime commercial property rents climb 1.0% in Q2 Rental values for UK prime commercial property grew by 1.0% in Q2 2016. 8% of CBRE monitored locations recorded increasing rents, while 1% recorded decreasing prime rents. Prime yields and estimated capital values for All Property both remained relatively flat despite Q2 being characterised by uncertainty around the EU Referendum.
Central London in July 2016 Take-up in Central London for July 2016 was 1.0.m sq ft, an increase of 24% on the previous month but below the 10-year average of 1.1m sq ft. Availability increased by 2% in July, standing at 13.6m sq ft, but still 7% below the 10-year average of 14.6m sq ft. The completion of a number of large deals saw under offers fall by 14% to stand at 3m sq ft, but remained ahead of the 10-year average of 2.8m sq ft. The largest deal of the month saw Wells Fargo acquire 220,700 sq ft at 33 Central, King William Street, EC4, widely seen as a vote of confidence in the City after the Leave vote in the EU referendum.