Table of Contents
Executive Summary
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- The market
- Commercial property market displays robust performance in 2014
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- Figure 1: Value of UK commercial property market, 200914
- Market recovery led by London
- Investor-owned share of commercial property rises from 48% in 2009 to 58% in 2014
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- Figure 2: Investor-owned share of UK commercial property market, 2009-14
- Retail remains largest sector of total commercial property stock
- Office represent strongest growth sector
- More robust economic performance boosts industrial property sector in 2014
- Capital value of “other” commercial sector up 5% in 2014
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- Figure 3: Segmentation of the UK commercial property market, by sector, 201014
- Market factors
- Low interest environment exerts positive influence on commercial property market
- Relaxation of planning policy for the conversion of office space into residential use contributes to current office space supply shortages
- Companies
- Strong rise in foreign investment – Especially in London office sector
- Real Estate Investment Funds (REITs) dominate shopping centre sector
- UK institutions hold about a fifth of the investor-owned commercial property stock
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- Figure 4: Holdings in commercial property market, by investor type, 2014
- What we think
Key Insights
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- How has the relaxation of planning policy for the conversion of office space into residential impacted the office market?
- Do potential interest rate rises and the current low inflation environment pose a threat to the commercial property market?
- Is investor interest in the supermarket sector starting to wane?
- What have been the recent trends in commercial property yields?
- Who are the main investors in the UK commercial property market?
- Outside the south east, which region is expected to provide the strongest opportunities for investors?
Introduction
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- Definitions
- Methodology
- Abbreviations
- Market positioning
- The commercial property performance cycle
UK Economy
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- Overview
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- Figure 5: UK GDP quarterly development, 2003-15
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- Figure 6: UK GDP in economic downturns and recoveries since 1979
- Inflation
- Interest rates
- House prices
- Consumer spending
- Manufacturing
- Business investment
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- Figure 7: UK GFCF 2003-15
Market Factors
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- Key points
- Economic factors
- Record low interest rates provide positive impetus for investment market
- UK Purchasing Manager Index (PMI) for services industries
- UK manufacturing Purchasing Manager Index (PMI)
- Retail sales and rise in online sales
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- Figure 8: Growth of value of retail sales at current prices seasonally adjusted, 2005-15
- Other factors
- Impact of planning laws on commercial property supply
- Supply and demand factors
- Business rates
- Return on property investment
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- Figure 9: IPD UK Annual Property Index, December 2014
- Non-residential property transactions
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- Figure 10: UK non-residential property transaction completions, by country, 2010-15
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- Figure 11: UK non-residential property transaction completions, 2010-15
- Private commercial construction output
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- Figure 12: Long term trend in private commercial construction output in Great Britain, 1970-2014
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- Figure 13: Analysis of private commercial construction in Great Britain, by type, 2010-14
- Private industrial construction output
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- Figure 14: Long term trend in private industrial construction output in Great Britain, 1970-2014
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- Figure 15: Analysis of private industrial new construction work in Great Britain, by sector 2010-14
Market Size and Segmentation
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- Key points
- Overview
- Investors’ share of commercial property market on the up
- Investors moving into new sectors
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- Figure 16: Value of UK commercial property market, 2009-14
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- Figure 17: Value of UK commercial property market, 2009-14
- Figure 18: Investor share of UK commercial property market, 2009-14
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- Figure 19: UK commercial property floorspace and rental value, 2007-13
- Market segmentation
- Segmentation by sector
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- Figure 20: Segmentation of the UK commercial property market, by sector, 2010-14
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- Figure 21: Sector share of investor-owned commercial property stock, 2014
- Segmentation by investor-type
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- Figure 22: Holdings in commercial property market, by investor type, 2013-14
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- Figure 23: Investor share of commercial property market, by sector, South East and rest of UK, 2014
Office Sector
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- Key points
- Overview
- Developers and investors returning to speculative office developments
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- Figure 24: Capital value of the UK office market, 2010-14
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- Figure 25: UK offices market, by region, 2014
- Figure 26: Office property transactions in Great Britain, 2013-15
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- Figure 27: Office property transactions by investor type, year-to-date 2015
- Figure 28: UK office floorspace and rental value, 2007-13
Retail Sector
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- Key points
- Overview
- Investor activity in retail sector up in 2014
- Investor interest in supermarket assets starting to wane due to difficulties faced by large operators
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- Figure 29: Capital value of the UK retail property market, 2010-14
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- Figure 30: UK retail property market, by sector, 2014
- Figure 31: Retail property transactions in Great Britain, 2013-15
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- Figure 32: Shopping centre property transactions by investor type, year-to-date 2015
- Figure 33: Retail warehouse property transactions by investor type, year-to-date 2015
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- Figure 34: Shop/Supermarket property transactions by investor type, year-to-date 2015
- Figure 35: UK retail floorspace and rental value, 2007-13
- Retail sector development pipeline
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- Figure 36: Shopping centre development pipeline, 2004-14
- Figure 37: Retail warehouse development pipeline, 2004-14
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- Figure 38: Grocery outlets development pipeline, 2004-14
Industrial Sector
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- Key points
- Overview
- Investors increasingly turning to industrial & logistics sector
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- Figure 39: Capital value of the UK industrial property market, 2010-14
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- Figure 40: UK industrial property market, by region, 2014
- Figure 41: Industrial property transactions in Great Britain, 2013-15
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- Figure 42: Industrial property transactions by investor type, year-to-date 2015
- Figure 43: UK industrial floorspace and rental value, 2007-13
- Upswing in speculative development in logistics sector driven by strong occupier demand
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- Figure 44: Industrial speculative development under construction, May 2012-February 2015
Other Commercial Sector
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- Key points
- Overview
- Investor confidence has returned to hotel sector
- London most active market for hotel transactions globally
- Healthy hotel development pipeline in major cities across the UK
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- Figure 45: Active hotel development pipeline by grading, Q4 2014
- Leisure sector returning to more healthy performance in line with improved consumer spending
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- Figure 46: Capital value of the UK other commercial property market, 2010-14
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- Figure 47: UK “other” commercial property market, by sector, 2014
- Figure 48: Property transactions in the leisure sector in Great Britain, 2013-15
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- Figure 49: UK “other” commercial floorspace and rental value, 2007-13
Regional Analysis
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- Key points
- Regional analysis of non-domestic properties in England & Wales
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- Figure 50: Number of non-domestic rateable properties in England & Wales, by sector and region, as at 31 March 2014
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- Figure 51: Rateable value of non-domestic properties in England & Wales, by sector and region, as at 31 March 2014
- Regional analysis of commercial property transactions
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- Figure 52: Commercial property transactions in Great Britain, by region, 2013-15
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- Figure 53: Regional importance in commercial property transactions, 2013-15
Market Trends
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- Key points
- Development of commercial property yields
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- Figure 54: Prime market yields, by sector, 2007-14
- Rental price developments
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- Figure 55: Prime office rents in the UK, December 2011-December 2014
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- Figure 56: Prime retail rents in the UK, December 2011-December 2014
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- Figure 57: Prime industrial rents in the UK, December 2011-December 2014
- Trends in average lease lengths
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- Figure 58: Average length of new leases, 2003 and 2013
- Shift from owner-occupied towards rented commercial property
- Commercial property development activity
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- Figure 59: Commercial development activity, 2010-15
- Trends in commercial property lending
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- Figure 60: Outstanding debt secured by commercial property lender, by lender type, 2014
- 2014 sees value of new loans on commercial property reach highest level since 2008
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- Figure 61: Allocation of loans secured by commercial property, by lender type, 2014
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- Figure 62: Allocation of loan books by property sector, 2004-14
- Loan-to-value ratios rise as investors are seeking riskier, higher returns
Industry Structure
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- Key points
- Overview
- Strong rise in overseas investors
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- Figure 63: Holdings in commercial property market, by investor type, 2014
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- Figure 64: Biggest investor type in each commercial property sector, 2014
- REITs
- Overseas investors
- Institutional investors
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- Figure 65: Holdings in buildings, property, land and new construction work by institutional groups, 2010-13
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- Figure 66: Net investment in buildings, property, land and new construction work by institutional groups, 2010-14
Company Profiles
British Land
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- Major recent acquisitions and disposals
- Company strategy
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- Figure 67: Financial analysis of British Land, 2010-14
Land Securities
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- Company strategy
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- Figure 68: Financial analysis of Land Securities, 2010-14
Great Portland Estates
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- Company strategy
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- Figure 69: Financial analysis of Great Portland Estates, 2010-14
Hammerson
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- Company strategy
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- Figure 70: Financial analysis of Hammerson, 2010-14
Intu Properties
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- Company strategy
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- Figure 71: Financial analysis of Intu Properties, 2010-14
Derwent London
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- Recent acquisitional activity
- Company strategy and outlook
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- Figure 72: Financial analysis of Derwent London, 2010-14
A & J Mucklow Group
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- Company strategy
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- Figure 73: Financial analysis of A & J Mucklow Group, 2010-14
Hansteen Holdings
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- Company strategy
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- Figure 74: Financial analysis of Hansteen Holdings, 2010-14
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- Figure 75: Turnover analysis of Hansteen Holdings, by geographic segment, 2013 and 2014
Daejan Holdings
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- Company strategy
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- Figure 76: Financial analysis of Daejan Holdings, 2010-14
SEGRO
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- Company strategy
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- Figure 77: Financial analysis of SEGRO, 2010-14
Shaftesbury
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- Company strategy
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- Figure 78: Financial analysis of Shaftesbury, 2010-14
Workspace Group
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- Company strategy
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- Figure 79: Financial analysis of Workspace Group, 2010-14
Bruntwood
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- Company strategy
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- Figure 80: Financial analysis of Bruntwood, 2010-14
LondonMetric Property
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- Company strategy
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- Figure 81: Financial analysis of LondonMetric Property, 2010-14
Grosvenor Group
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- Company strategy
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- Figure 82: Financial analysis of Grosvenor Group, 2009-13
Standard Life Investments (Holdings)
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- Company outlook
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- Figure 83: Financial analysis of Standard Life Investments (Holdings), 2009-13
Legal & General Property
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- Figure 84: Financial analysis of Legal & General Property, 2010-14
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M&G Real Estate
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- Figure 85: Financial analysis of M&G Real Estate, 2010-14
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Market Forecast
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- Key points
- Commercial and industrial construction output forecast
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- Figure 86: Forecast private commercial construction output in Great Britain, 2015-19
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- Figure 87: Forecast of private commercial construction in Great Britain, by sector, 2015-19
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- Figure 88: Forecast private industrial construction output in Great Britain, 2015-19
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- Figure 89: Forecast of private industrial new construction work in Great Britain, by sector 2015-19
- Commercial property market forecast
- Commercial property remains an attractive investment option
- Regions to attract increased investment
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- Figure 90: Forecast of UK commercial property market, 2015-19
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- Figure 91: Development of the UK commercial property capital value, 2009-14 (historic) and 2015-19 (forecast)
- Figure 92: Projected investor share of UK commercial property market, 2015-19
- Market forecast segmentation
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- Figure 93: Forecast segmentation of the UK commercial property market, 2015-19
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- Figure 94: Forecast segmentation of the UK commercial property market, 2015-19
- Key trends by sector
- Offices
- Retail
- Industrial
- “Other” commercial property
Further Sources and Contacts
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- Trade associations and bodies
- British Property Federation
- The Association of Real Estate Funds
- British Council for Offices
- The Commercial Real Estate Finance Council Europe
- The Investment Association
- The Investment Property Forum
- Trade exhibitions and conferences
- RICS Commercial Property Conference 2015
- MIPIM UK 2015
- Trade magazines
- Estates Gazette
- Property Magazine International
- Property Week
- Property Wire
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