Are we at the top of the current cycle?

We are expecting lower returns over the next two years.

17th December 2014, words by Steven Lang

 

■ As we approach the end of the year, it is timely to review some short-term forecasts. The Investment Property Forum Consensus Forecasts were recently released and the total returns predictions are shown in Graph 3.

click on image below to enlarge

Graph 3

■ The expectation for 2015 is lower returns, compared to this year, driven by slower capital value growth. Despite this, all UK sectors are anticipated to be at double-digits. As seen this year, the office and industrial sectors are anticipated to out-perform retail.

■ Higher corporate demand, resulting in increased take-up levels across all sectors and lack of development regionally, will justify the buoyant investment markets seen in the past couple of years. However, there are headwinds. The known 'unknowns' include the impact of the General Election in May and how this will impact on corporate spending in Q1, particularly the appetite to take space and drive rental growth.

■ Of course, the UK relies heavily on the eurozone as a trading partner and this balances out the more positive domestic outlook. The deflationary forces at work there, compounded by falling energy prices, has put increasing pressure on the European Central Bank to begin Quantitative Easing described as a "last throw of the dice". Falling demand for UK exports/services would be detrimental to the UK economy and, ultimately, commercial property.

 

 
 

Key Contacts

Steven Lang

Steven Lang

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8738

 

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