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Year on year, UK real estate markets will continue to expand, but the overall trend will be a slowing of growth to more sustainable levels, according to the latest forecast. Prime London commercial markets will continue to grow in 2015, but confidence and investor interest will encourage growth in prime regional markets, says the report from commercial real estate advisor CBRE. It reveals that in 2014, total returns to property averaged nearly 20% but predicts that in 2015, there will be a slowing of growth rates with average returns just under 13%. It also points out that the general election will bring some uncertainty in property decision making and adds that year on year there will be significant rental growth for most sectors but a further improvement in yields as investment inflows continue into the UK market. Prospects for retail properties remain among the most uncertain, with few sure signs just yet that stable growth is returning to consumer spending, and cost pressures and distractions across the sector, particularly in grocery retailing, although in 2015 as in 2014, prime retail destinations will remain a safe bet. Industrial property will continue to be attractive for investors due to a dearth of quality supply and price growth in the housing market will ease in 2015 to around 6% with transaction levels having peaked for the time being. ‘This has been a year of extraordinary expansion across the property sector and while this will continue into 2015, overall there will be a return to more sustainable levels of growth,’ said Miles Gibson, head of UK research at CBRE. ‘Rental growth will continue in all sectors and we expect investment yields to continue to improve as levels of capital flows into the UK market remain high. In terms of where growth, we forecast a ripple effect next year as property investors shift from London out to the regions,’ he explained. He also pointed out that global economic factors, most notably the falling price of crude oil, in 2015 will benefit the UK. ‘The likely effects of pushing down inflation and boosting consumer spending, means we should expect to see a knock on benefit for retailers which in turn could stimulate growth in the retail property sector,’ said Gibson. ‘Although there positive signals for the property market, we recognise that there will be uncertainty caused by the imminent general election. The combination of these trends makes 2015 an intriguing prospect for the sector,’ he added. Continue reading →

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