Table of Contents
Executive Summary
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- The market
- Commercial property market displays robust performance in 2014 and 2015
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- Figure 1: Value of UK commercial property market, 2010-15
- Commercial property continued to offer double-digit returns for investors in 2015
- Annual returns set to moderate in 2016
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- Figure 2: Investor-owned share of UK commercial property market, 2010-15
- Retail represents largest sector of commercial property market
- Office sector leads growth in commercial property market
- Buoyant demand for logistics space drives industrial property market
- Healthy investor appetite for ‘alternative’ assets
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- Figure 3: Segmentation of the UK commercial property market, by sector, 2011-15
- 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
- Overseas investors represent the largest investor type in the UK commercial property market
- 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, 2015
- What we think
Key Insights
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- Do potential interest rate rises pose a threat to the commercial property market?
- What have been the recent trends in commercial property yields?
- What are the recent trends in the type of commercial property investors are attracted to?
- 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, 2003-16
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- Figure 6: UK GDP in economic downturns and recoveries since 1979
- Inflation
- Interest rates
- House prices
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- Figure 7: UK house price changes, 2004-2016
- Consumer spending
- Manufacturing
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- Figure 8: UK manufacturing, 2013-16
- Business investment
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- Figure 9: UK GFCF 2003-15
- Imports
- Exports
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 10: Growth of value of retail sales at current prices seasonally adjusted, 2010-16
- 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 11: IPD UK Annual Property Index, December 2015
- New stamp duty rates for commercial property
- Non-residential property transactions
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- Figure 12: UK non-residential property transaction completions, by country, 2010-15
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- Figure 13: UK non-residential property transaction completions, 2011-15
- Private commercial construction output
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- Figure 14: Long term trend in private commercial construction output in Great Britain, 1970-2014
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- Figure 15: Analysis of private commercial construction in Great Britain, by type, 2011-15
- Private industrial construction output
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- Figure 16: Long term trend in private industrial construction output in Great Britain, 197015
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- Figure 17: Analysis of private industrial new construction work in Great Britain, by sector 2011-15
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
- Impending EU referendum has put off investors during the first half of 2016 – subsequent decision to leave EU set to further negatively impact investor sentiment
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- Figure 18: Value of UK commercial property market, 2011-15
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- Figure 19: Value of UK commercial property market, 2009-15
- Figure 20: Investor share of UK commercial property market, 2011-15
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- Figure 21: UK commercial property floorspace and rental value, 2008-14
- Market segmentation
- Segmentation by sector
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- Figure 22: Segmentation of the UK commercial property market, by sector, 2011-15
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- Figure 23: Sector share of investor-owned commercial property stock, 2015
- Segmentation by investor-type
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- Figure 24: Holdings in commercial property market, by investor type, 2013-15
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- Figure 25: Investor commercial property market, by sector, South East and Rest of UK, 2015
Office Sector
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- Key points
- Overview
- Overseas investors drive growth in London office sector
- Shift away from owner-occupied offices
- Strong investor appetite for UK prime offices
- London offices
- Developers and investors returning to speculative office developments
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- Figure 26: Capital value of the UK office market, 2011-15
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- Figure 27: UK offices market, by region, 2015
- Figure 28: Office property transactions in Great Britain, 2013-16
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- Figure 29: Office property transactions by investor type, Year-to-date 2016
- Figure 30: UK office floorspace and rental value, 2008-14
Retail Sector
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- Key points
- Overview
- Investor activity in core retail locations remained strong during 2015
- High street shops show strongest capital value growth in 2015
- Investor interest in supermarket assets wanes due to difficulties faced by large operators
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- Figure 31: Capital value of the UK retail property market, 2011-15
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- Figure 32: UK retail property market, by sector, 2015
- Figure 33: Retail property transactions in Great Britain, 2013-16
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- Figure 34: Shopping centre property transactions by investor type, Year-to-date 2016
- Figure 35: Retail warehouse property transactions by investor type, Year-to-date 2016
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- Figure 36: Shop/Supermarket property transactions by investor type, Yeartodate 2016
- Figure 37: UK retail floorspace and rental value, 2007-14
- Retail sector development pipeline
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- Figure 38: Shopping centre development pipeline, 2004-15
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- Figure 39: Retail warehouse development pipeline, 2004-15
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- Figure 40: Grocery outlets development pipeline, 2004-15
Industrial Sector
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- Key points
- Overview
- Industrial & logistics sector remains attractive for investors
- Investors increasingly turning towards funding speculative developments
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- Figure 41: Capital value of the UK industrial property market, 2011-15
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- Figure 42: UK industrial property market, by region, 2015
- Figure 43: Industrial property transactions in Great Britain, 2013-16
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- Figure 44: Industrial property transactions by investor type, Year-to-date 2016
- Figure 45: UK industrial floorspace and rental value, 2008-14
- Upswing in speculative development in logistics sector driven by strong occupier demand
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- Figure 46: Industrial speculative development under construction, May 2012-February 2016
Other Commercial Sector
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- Key points
- Overview
- Investor confidence has returned to hotel sector
- London remains one of the top markets for hotel transactions globally
- Healthy hotel development pipeline in major cities across the UK
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- Figure 47: Active hotel development pipeline by grading, Q1 2016
- Leisure sector returning to health in line with improved consumer spending
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- Figure 48: Capital value of the UK other commercial property market, 2011-15
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- Figure 49: UK “other” commercial property market, by sector, 2015
- Figure 50: Property transactions in the leisure sector in Great Britain, 2013-16
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- Figure 51: UK “other” commercial floorspace and rental value, 2008-14
Regional Analysis
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- Key points
- Regional analysis of non-domestic properties in England & Wales
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- Figure 52: Number of non-domestic rateable properties in England & Wales, by sector and region, as at 31 March 2015
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- Figure 53: Rateable value of non-domestic properties in England & Wales, by sector and region, as at 31 March 2015
- Regional analysis of commercial property transactions
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- Figure 54: Commercial property transactions in Great Britain, by region, 2013-16
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- Figure 55: Regional importance in commercial property transactions, 2014-16
Market Trends
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- Key points
- Development of commercial property yields
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- Figure 56: Prime market yields, by sector, 2013-16
- Rental price developments
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- Figure 57: Prime office rents in the UK, December 2011- December 2015
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- Figure 58: Prime retail rents in the UK, December 2011-December 2015
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- Figure 59: Prime industrial rents in the UK, December 2011- December 2014
- Trends in average lease lengths
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- Figure 60: Average length of leases, by tenant type, 2015
- Shift from owner-occupied towards rented commercial property
- Commercial property development activity
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- Figure 61: Commercial development activity, 2010-16
- Trends in commercial property lending
- Confidence in UK commercial property lending market starts to return in 2015
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- Figure 62: Outstanding debt secured by commercial property lender, by lender type, 2015
- 2014 and 2015 witness a strong increase in the value of new loans on commercial property
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- Figure 63: Allocation of loans secured by commercial property, by lender-type, 2015
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- Figure 64: Allocation of loan books by property sector, 2004-14
- Loan-to-value ratios fall in 2015, suggesting good lender discipline despite the strength of the market
Industry Structure
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- Key points
- Overview
- Overseas investors drive value growth of commercial property sector
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- Figure 65: Holdings in commercial property market, by investor type, 2015
- Figure 66: Biggest investor type in each commercial property sector, 2014
- REITs
- Overseas investors
- Institutional investors
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- Figure 67: Holdings in buildings, property, land and new construction work by institutional groups, 2010-14
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- Figure 68: 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 69: Financial analysis of British Land, 2011-15
Land Securities
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- Company strategy
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- Figure 70: Financial analysis of Land Securities, 2011-15
Great Portland Estates
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- Company strategy
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- Figure 71: Financial analysis of Great Portland Estates, 2011-15
Hammerson
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- Company strategy
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- Figure 72: Financial analysis of Hammerson, 2011-15
Intu Properties
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- Company strategy
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- Figure 73: Financial analysis of Intu Properties, 2011-15
Derwent London
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- Company strategy and outlook
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- Figure 74: Financial analysis of Derwent London, 2011-15
A & J Mucklow Group
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- Company strategy
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- Figure 75: Financial analysis of A & J Mucklow Group, 2011-15
Hansteen Holdings
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- Company strategy
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- Figure 76: Financial analysis of Hansteen Holdings, 2011-15
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- Figure 77: Turnover analysis of Hansteen Holdings, by geographic segment, 2011-15
Daejan Holdings
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- Company strategy
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- Figure 78: Financial analysis of Daejan Holdings, 2011-15
SEGRO
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- Company strategy
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- Figure 79: Financial analysis of Segro, 2011-15
Shaftesbury
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- Company strategy
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- Figure 80: Financial analysis of Shaftesbury, 2011-15
Workspace Group
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- Company strategy
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- Figure 81: Financial analysis of Workspace Group, 2011-15
Bruntwood
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- Company strategy
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- Figure 82: Financial analysis of Bruntwood, 2011-15
LondonMetric Property
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- Company strategy
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- Figure 83: Financial analysis of LondonMetric Property, 2011-15
Grosvenor Group
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- Company strategy
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- Figure 84: Financial analysis of Grosvenor Group, 2011-15
Standard Life Investments (Holdings)
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- Company outlook
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- Figure 85: Financial analysis of Standard Life Investments (Holdings), 2010-14
Legal & General Property
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- Figure 86: Financial analysis of Legal & General Property, 2011-15
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M&G Real Estate
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- Figure 87: Financial analysis of M&G Real Estate, 2011-15
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Market Forecast
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- Key points
- Commercial and industrial construction output forecast
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- Figure 88: Forecast private commercial construction output in Great Britain, 2016-20
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- Figure 89: Forecast of private commercial construction in Great Britain, by sector, 2016-20
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- Figure 90: Forecast private industrial construction output in Great Britain, 2016-12
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- Figure 91: Forecast of private industrial new construction work in Great Britain, by sector 2016-20
- Commercial property market forecast
- Investors increasingly reliant on rental income growth and asset management initiatives to drive performance, as returns are set to moderate
- Investor appetite for alternative assets remains strong
- Core regional centres attract increased investor interest
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- Figure 92: Forecast of UK commercial property market, 2016-20
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- Figure 93: Development of the UK commercial property capital value, 2010-15 (historic) and 2016-20 (forecast)
- Figure 94: Projected investor share of UK commercial property market, 2016-20
- Market forecast segmentation
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- Figure 95: Forecast segmentation of the UK commercial property market, 2016-20
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- Figure 96: Forecast segmentation of the UK commercial property market, 2016-20
- Key trends by sector
- Offices
- Retail
- Industrial
- ‘Other’ commercial property
Further Sources and Contacts
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- Trade associations and bodies
- Trade exhibitions and conferences
- Trade magazines
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