Since the turn of the year there have been signs of improvement in the UK commercial property market. This has led to a number of analysts forecasting that 2013 will be the year the market begins to enter the recovery phase.
The poor performance of the high street worries some market analysts
However in the wake of major retailers like HMV, Jessops and now Thomas Cook closing stores, the retail market continues to worry other analysts who predict that this sector will continue to struggle over the next year, hampering the prospects of a wider market upturn.
Bestinvest managing director Jason Hollands is one expert warning investors to be cautious.
He said; “The outlook for the UK economy remains weak, particularly for retailers as exemplified by recent high profile collapses such as HMV and Jessops.
This is adding downward pressure on rents, while void rates – those periods when properties go empty between tenants – are on the rise.”
Hollands goes on to point out that in the UK property market there will be a big increase in loan refinancing this year and again in 2014. The banks are being more conservative in their lending strategies, and there is a risk that they will refuse to extend credit on such favourable terms to property owners. As a result a number of properties may end up back onto the market, which would drive down valuations.
People who are intent on buying property in the UK should look to London and the south-east, he advises, since these areas are riding out the economic uncertainty better than other parts of the country.
However, The Deloitte 2013 UK Real Estate Predictions, published in January, indicate that international demand for UK commercial property is expected to increase this year.
Premier Pan European Share fund senior investment manager Alex Ross points out that REITs are benefitting from being able to access the bond market.
He said; “The largest UK and northern European Reits are now taking advantage of the high demand bond markets to issue bonds with, from the borrower’s perspective, highly attractive long-term fixed finance costs. This is why the Reit sector is well positioned to drive market leading returns to investors in the coming years.”
So, while there is no doubt that the retail market is not performing particularly well at present, if investors can get into properties which are fully occupied and can provide a good yield in an era of low interest, then investing in UK commercial property makes sense.
Good Blog!! Yeah it is true that property sector of UK is growing tremendously despite the delicate condition of the economy . One of the reason for this huge demand to buy property in London is due to its population growth.
Very true Lewis, but the Capital will always remain popular. If you have money, London will always be attractive to investors.