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Latest National Research
National Office Market Review: H2 2014
After a year of strong growth economic growth for the UK, occupier demand in the regional cities has also performed exceptionally well. All the regional cities, except the South East region, have posted take-up totals well ahead of their respective long-run averages. to read more, download the full report here.
A new index analysing the average returns lenders to the UK commercial real estate (CRE) market can expect, shows that real estate debt will provide far better returns than competing financial instruments.
Senior debt returns against UK commercial real estate are forecast to be 4.1%pa (gross) and 3.7%pa on a risk adjusted basis (net of Expected Loss) over the next five years.
This compares favourably with the five year Gilt yield of 1.2%, offering a premium of 2.9%pa on a gross basis and 2.5%pa on a net basis.
In both instances, this is significantly above our estimate of the long-term premium to Gilts, showing that senior CRE lending remains attractive.
Forecast returns to mezzanine lending have reduced to an estimated 8.3%pa and 5.2%pa on a gross and risk adjusted basis respectively; this still offers a premium to returns on senior lending, though a narrower one relative to the last couple of years.
This report shows that, while here has been a recent drop in returns on commercial property debt – predominantly due to falls in interest rates and margins – CRE debt continues to offer a very healthy premium to the risk-free rate. As a consequence it will remain very attractive to existing and new lenders for the foreseeable future. Insurance companies and other non-bank lenders will continue to be attracted to the premium available versus risk-free assets, while the second half of 2014 undoubtedly demonstrated that traditional lenders are increasingly becoming attracted back into the sector by the benign outlook for capital value growth.
In this edition of CBRE’s UK Healthcare MarketView, Tim Street of Patron Capital talks to Keith Harris following the successful sale of Gracewell Healthcare to Health Care REIT (HCN) to outline where he sees the UK Healthcare market moving over the course of 2015.
UK institutional investors invested £750m in 2014 capitalising on an increasingly liquid market.
Overseas investors remained the most active buyer group but 2014 was as much about M&A activity by PE Funds and Trade Buyers as it was about the US REITs. There were 15 WholeCo exits in 2014.
Pricing has increased across the board. EBITDAR multiples are up and investment yields are down.
Investor demand widened across all healthcare asset classes and risk profiles, increasing potential funding and deal flow for 2015.
Available leisure investment stock in 2014 was outstripped by demand, but where investors deployed capital in scale.
Operationally the sector had a relatively good recession, now recognised by investor markets. There is increased appetite from a widening range of investors for direct equity investment into the sector.
Direct investment EBITDAR multiples are up, investment yields are down.
All the indicators point to further positive pricing dynamics in 2015.
The latest CBRE Monthly Index shows a steady start to 2015 after the very strong finish to last year, with both January and February recording slower capital and rental value growth.
Average capital value growth for all UK commercial property increased by 0.5% in February, resulting in a total return of 0.9%.
Rental values recorded the same rate of growth as in January (0.2%).
Secondary property in all market segments excl. Central London saw negative capital value growth from Jun 2009 to Oct 2013. Since Nov 2013 there has been capital value growth for secondary property in all segments apart from offices outside the South East.