Table of Contents
Executive Summary
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- The market
- Brexit concerns impact commercial property market in 2016
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- Figure 1: Value of UK commercial property market, 2010-16
- Investors turn more risk adverse in 2016
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- Figure 2: Investor-owned share of UK commercial property market, 2012-16
- Retail represents largest sector of commercial property market
- Offices represented strongest growth sector over the last five years
- Industrial property outperforms all other major sectors in 2016
- Investors continue to be attracted to ‘alternative’ assets
- Outlook for commercial property market is cautiously optimistic
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- Figure 3: Segmentation of the UK commercial property market, by sector, 2012-16
- Market factors
- Record low interest rates provide positive impetus for investment market, but Brexit-induced uncertainty makes investors more risk-adverse
- Rising inflation and continued wage squeeze to impact consumer spending in 2017
- Latest business rates revaluation has biggest impact on London retail and office sectors
- Companies
- Overseas investors represent the largest investor type in the UK commercial property market
- Institutional investors represent the second largest investor type
- Real Estate Investment Funds (REITs) dominate shopping centre sector
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- Figure 4: Holdings in commercial property market, by investor type, 2015
- What we think
Key Insights
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- What is the impact of Brexit on the UK commercial property market?
- What is the short-term outlook for the commercial property market?
- Where is the investment market headed?
- Why are ‘alternative’ commercial property assets becoming more popular with investors? Which assets attract the most attention?
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: Forecast GDP development 2017-21
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- Figure 6: UK GDP quarterly development, 2004-17
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- Figure 7: UK GDP in economic downturns and recoveries since 1979
- Inflation
- Interest rates
- House prices
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- Figure 8: UK House price changes, 2006-17
- Consumer spending
- Manufacturing
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- Figure 9: UK manufacturing, 2014-17
- Business investment
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- Figure 10: UK GFCF 2003-17
- Imports
- Exports
Market Factors
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- Key points
- Economic factors
- Record low interest rates provide positive impetus for investment market, but Brexit-induced uncertainty makes investors more risk-adverse
- 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 11: 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
- Latest business rates revaluation has biggest impact on London retail and office sectors
- Return on property investment
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- Figure 12: Annual property returns, by sector, 2013-16
- Government Hubs programme to boost regional office take-up in the short term
- New stamp duty rates for commercial property
- Non-residential property transactions
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- Figure 13: UK non-residential property transaction completions, by country, 2012-16
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- Figure 14: UK non-residential property transaction completions, 2012-16
- Private commercial construction output
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- Figure 15: Long term trend in private commercial construction output in Great Britain, 1970-16
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- Figure 16: Analysis of private commercial construction in Great Britain, by type, 2012-16
- Private industrial construction output
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- Figure 17: Long term trend in private industrial construction output in Great Britain, 1970-16
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- Figure 18: Analysis of private industrial new construction work in Great Britain, by sector 2012-16
Market Size & Segmentation
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- Key points
- Overview
- London offices, shopping centres and retail warehouses now almost entirely owned by investors
- ‘Alternative’ commercial property attracting increased interest from investors looking for secure, long-term income
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- Figure 19: Value of UK commercial property market, 2012-16
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- Figure 20: Value of UK commercial property market, 2009-16
- Figure 21: Investor share of UK commercial property market, 2012-16
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- Figure 22: UK commercial property floorspace and rental value, 2008-15
- Market segmentation
- Segmentation by sector
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- Figure 23: Segmentation of the UK commercial property market, by sector, 2012-16
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- Figure 24: Sector share of investor-owned commercial property stock, 2016
- Segmentation by investor-type
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- Figure 25: Holdings in commercial property market, by investor type, 2014-16
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- Figure 26: Investor commercial property market, by sector, South East and rest of UK, 2016
Office Sector
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- Key points
- Overview
- Overseas investors drive growth in London office sector
- UK prime offices continued to attract interest from foreign buyers during 2016, supported by a weaker pound sterling
- Shift away from owner-occupied offices
- Investors increasingly looking to prime regional office markets for investment opportunities
- London offices
- Rising speculative developments likely to slow as developers cut speculative building due to market uncertainty
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- Figure 27: Capital value of the UK office market, 2012-16
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- Figure 28: UK offices market, by region, 2016
- Figure 29: Office property transactions in Great Britain, 2013-17
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- Figure 30: Office property transactions by investor type, year-to-date 2017
- Figure 31: UK office floorspace and rental value, 2009-15
Retail Sector
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- Key points
- Overview
- Growth in online and multichannel retail drives structural change in retail property market
- Investor activity in high street retail up in 2016, but wanes in shopping centres and retail warehouses
- High street retail property owners continue to face considerable risks
- Central London retail property market attracts increased interest from overseas buyers
- Shopping centre investment activity rebounded in final quarter of 2016
- Shopping centre development dominated by extensions
- Occupier demand in retail warehousing driven by bulky goods sector
- Investors return to supermarket property after a few years of muted activity
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- Figure 32: Capital value of the UK retail property market, 2012-16
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- Figure 33: UK retail property market, by sector, 2016
- Figure 34: Retail property transactions in Great Britain, 2013-17
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- Figure 35: Shopping centre property transactions by investor type, year-to-date 2017
- Figure 36: Retail warehouse property transactions by investor type, year-to-date 2017
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- Figure 37: Shop/supermarket property transactions by investor type, year-to-date 2017
- Figure 38: UK retail floorspace and rental value, 2009-15
Industrial Sector
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- Key points
- Overview
- Industrial & logistics represents one of the most attractive sectors for investors
- Industrial and logistics property sector continues to be plagued by constrained supply
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- Figure 39: Industrial speculative development under construction, May 2012- January 2017
- Figure 40: Capital value of the UK industrial property market, 2012-16
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- Figure 41: UK industrial property market, by region, 2016
- Figure 42: Industrial property transactions in Great Britain, 2013-17
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- Figure 43: Industrial property transactions by investor type, year-to-date 2017
- Figure 44: UK industrial floorspace and rental value, 2009-15
Other Commercial Sector
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- Key points
- Overview
- Investor confidence has returned to hotel sector
- London accounts for half of all UK hotel transactions in 2016
- Branded budget hotels continue to drive hotel developments in major cities across the UK
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- Figure 45: Active hotel development pipeline by grading, Q4 2016
- Diverse leisure sector remains popular with investors, attracted by secure long-term income opportunities
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- Figure 46: Capital value of the UK other commercial property market, 2012-16
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- Figure 47: UK “other” commercial property market, by sector, 2016
- Figure 48: Property transactions in the leisure sector in Great Britain, 2013-17
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- Figure 49: UK “other” commercial floorspace and rental value, 2009-15
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 2016
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- Figure 51: Rateable value of non-domestic properties in England & Wales, by sector and region, as at 31 March 2016
- Regional analysis of commercial property transactions
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- Figure 52: Commercial property transactions in Great Britain, by region, 2013-17
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- Figure 53: 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 54: Prime market yields, by sector, 2014-17
- Rental Price Developments
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- Figure 55: Prime office rents in the UK, December 2011-December 2016
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- Figure 56: Prime retail rents in the UK, December 2011- December 2016
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- Figure 57: Prime industrial rents in the UK, December 2011- December 2016
- Trends in average lease lengths
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- Figure 58: Average length of leases, by tenant type, 2016
- Shift from owner-occupied towards rented commercial property
- Commercial property development activity
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- Figure 59: Commercial development activity, 2010-16
- Trends in commercial property lending
- Commercial property lending activity remains steady in 2016, but with increasing caution among lenders
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- Figure 60: Outstanding debt secured by commercial property lender, by lender type, 2016
- Following two buoyant years for new loan originations, 2016 saw a decline in new loans on commercial property
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- Figure 61: Allocation of new loans originations, by lender-type, 2016
- Loan-to-value ratios continue to edge downwards in 2016
Industry Structure
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- Key points
- Overview
- Overseas investors drive value growth of commercial property sector
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- Figure 62: Holdings in commercial property market, by investor type, 2016
- Figure 63: Biggest investor type in each commercial property sector, 2014
- REITs
- Overseas investors
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- Figure 64: Overseas holdings in commercial property market, by investor type, 2015
- Institutional investors
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- Figure 65: Holdings in buildings, property, land and new construction work by institutional groups, 2010-15
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- Figure 66: Net investment in buildings, property, land and new construction work by institutional groups, 2011-16
- Company profiles
British Land
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- Company strategy
- British Land cuts exposure to speculative developments post Brexit vote
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- Figure 67: Financial analysis of British Land, 2012-16
Land Securities
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- Company strategy
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- Figure 68: Financial analysis of Land Securities, 2012-16
Great Portland Estates
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- Rental value growth slows in London office market
- Company strategy
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- Figure 69: Financial analysis of Great Portland Estates, 2012-16
Hammerson
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- Company strategy
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- Figure 70: Financial analysis of Hammerson, 2012-16
Intu Properties
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- Company strategy
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- Figure 71: Financial analysis of Intu Properties, 2012-16
Derwent London
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- Recent acquisitions and disposals include:
- Company strategy and outlook
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- Figure 72: Financial analysis of Derwent London, 2012-16
A & J Mucklow Group
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- Company strategy and outlook
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- Figure 73: Financial analysis of A & J Mucklow Group, 2012-16
Hansteen Holdings
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- Company strategy
- Company performance
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- Figure 74: Financial analysis of Hansteen Holdings, 2012-16
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- Figure 75: Turnover analysis of Hansteen Holdings, by geographic segment, 2012-16
Daejan Holdings
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- Company strategy
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- Figure 76: Financial analysis of Daejan Holdings, 2012-16
SEGRO
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- Company strategy
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- Figure 77: Financial analysis of Segro, 2012-16
Shaftesbury
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- Company strategy
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- Figure 78: Financial analysis of Shaftesbury, 2012-16
Workspace Group
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- Company strategy
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- Figure 79: Financial analysis of Workspace Group, 2012-16
Bruntwood
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- Company strategy
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- Figure 80: Financial analysis of Bruntwood, 2012-16
LondonMetric Property
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- Company strategy
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- Figure 81: Financial analysis of LondonMetric Property, 2012-16
Grosvenor Group
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- Company strategy and outlook
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- Figure 82: Financial analysis of Grosvenor Group, 2012-16
Standard Life Investments (Holdings)
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- Company outlook
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- Figure 83: Financial analysis of Standard Life Investments (Holdings), 2011-15
Legal & General Property
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- Company strategy
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- Figure 84: Financial analysis of Legal & General Property, 2012-16
M&G Real Estate
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- Figure 85: 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 86: Forecast private commercial construction output in Great Britain, 2017-21
- Figure 87: Forecast of private commercial construction in Great Britain, by sector, 2017-21
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- Figure 88: Forecast private industrial construction output in Great Britain, 2017-21
- Figure 89: Forecast of private industrial new construction work in Great Britain, by sector 2017-21
- Commercial property market forecast
- Outlook for commercial property market remains cautiously optimistic despite concerns following Brexit vote
- Outlook for investor demand remains positive, with wider UK market receiving more attention
- Investors are shifting focus to long-term, secure, income-producing assets as they turn more risk-adverse
- Investor appetite for alternative assets remains strong
- Core regional centres attract increased investor interest
- Northern Power House and Midlands Engine to support regional growth
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- Figure 90: Forecast of UK commercial property market, 2017-21
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- Figure 91: Development of the UK commercial property capital value, 2012-16 (historic) and 2017-21 (forecast)
- Figure 92: Projected investor share of UK commercial property market, 2017-21
- Market forecast segmentation
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- Figure 93: Forecast segmentation of the UK commercial property market, 2017-21
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- Figure 94: Forecast segmentation of the UK commercial property market, 2017-21
- Key trends by sector
- Offices
- Retail
- Industrial
- ‘Other’ commercial property
Further Sources & 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 2017
- MIPIM UK 2017
- Trade magazines
- Estates Gazette
- Property Magazine International
- Property Week
- Property Wire
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