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UK commercial property market could see short term weakening due to Brexit
The UK commercial property market is likely to see a weakening in demand due to the decision of the British people to leave the European Union. Foreign investors in particular are likely to cool while the terms for the country to leave are thrashed out as uncertainty about direction and timing affect decision making, according to experts. Even if it is effectively ‘business as usual’ for the UK in terms of trade and legislation until 2018 when the actual exit is likely to take place, such a major change will inevitably create uncertainty in the economy and real estate markets, according to Chris Ireland, chief executive officer of JLL UK. He explained that in the event of a well-managed exit these impacts will be largely confined to the UK. ‘In the short term we may see a weakening in occupier demand. The impact on rents may be limited by tight supply, but activity will be adversely hit while initial uncertainty about direction and timing continues,’ said Ireland. ‘Investor sentiment may also remain subdued in the short to medium term. For property markets, the initial correction may be most severe but should be followed by an upturn as opportunities re-emerge in UK core markets and benefits of weak sterling are recognised. Sentiment and relative pricing will be key,’ he pointed out. ‘Much will depend on the speed of negotiation, the wider political picture and whether a clear direction of travel and timetable for an EU exit is established early on,’ he added. According to an analysis by JLL occupier demand will weaken in line with economic growth and declining business sentiment. The impact on rents may be limited by tight supply, but activity will be adversely hit. It also suggests that investor sentiment will deteriorate further, subduing capital flows in the short to medium term and there is likely to be a negative capital value adjustment over the next two years, estimated at a fall of up to 10% with yields moving around 50bp. It points out that London sectors remain most vulnerable to correction given current keen pricing and their multinational occupier base but much will depend on the speed of negotiation, the wider political picture and whether a clear and favourable direction is established early on. According to Mark Clacy-Jones of international real estate firm Knight Frank the decision will cause volatility across all investment markets, and real estate will be no exception and he predicts that uncertainty over future economic conditions in the UK will cause some deals on hold to be shelved, and occupiers will reconsider the amount of space they need outside of the single market. ‘A fall in the value of sterling, combined with falling property values will be a buy sign for opportunistic overseas investors once the initial correction has occurred. This will cause a widening yield gap as real estate yields rise and bond rates fall from further Bank of England monetary loosening and will make property… Continue reading
Call for housing and property skills shortage in Ireland to be addressed
A skills shortage is set to affect Ireland’s ability to address its housing crisis and infrastructure deficit, it is claimed. In particular there is a shortfall of qualified graduates coming into the profession, according to the newly elected president of the Society of Chartered Surveyors Ireland (SCSI) Claire Solon, a chartered planning and development surveyor. Research carried out by the Society earlier this year revealed that over 2,000 new job opportunities are expected to be created across the surveying profession in the next four years. However, based on current enrolment numbers, there will only be enough construction and property related surveying graduates to fill just over half of them and Solon it was imperative to have the qualified personnel to meet the needs of the Irish economy. ‘It’s not only the construction of homes that we need these qualified graduates, it’s also for the delivery of infrastructure that our country needs to keep pace with the growth of the economy, such as office buildings, hotels, roads and bridges,’ she explained. ‘I will be looking at several ways in which we can combat this shortage to get graduates into the workforce faster such as on the job training programmes as well as accelerating routes for those interested in becoming surveyors,’ she added. This will included a media campaign to encourage students to choose construction and property courses. ‘We’re working with accredited colleges and in-house to develop part time and and modular programmes which enables people to work while studying or to convert graduates from other areas like business or economics into the property & construction sector,’ Solon pointed out. She also said that women only account for one fifth of the Society’s membership and that needed to change. ‘When speaking with female graduates, they often say that they were unaware of the vast array of professions that exist within the surveying umbrella. So I believe communication is key here, to really highlight the variety of careers within surveying,’ said Solon. She pointed out that a chartered planning and development surveyor can be involved in managing teams from the initial viability study to the delivery of major building projects while a chartered facilities manager could be tasked with organising the operation of high spec office premises for technology companies such as Facebook, Google or Ebay. ‘If you prefer the outdoor life, chartered geomatic surveyors spend most of their time on site, now using high powered drones and sophisticated technology to map and survey land,’ she added. Continue reading
Research reveals a surge in residential investment in Lisbon
Lisbon has seen a surge in residential investment and development activity in the last two years, according to new research. The city is emerging from economic difficulties in a nation which underwent an European Union and International Monetary Fund bailout in 2011 and various initiatives are helping to revive its property markets, says the report from international real estate firm Savills. It points out that reform of Portugal’s residential tenancy laws, coupled with inward investor incentives, has spurred wide scale regeneration of the built environment, helping Lisbon to foster economic recovery faster than other parts of the country. Indeed, some €1.56 billion has been injected into Portugal’s residential markets since the golden visa programme was launched in 2012 and the bulk of this has gone into Lisbon. New apartments are being constructed and historic buildings are being redeveloped to meet modern day occupier demands. The report also points out that Portugal is now emerging from recession and the national economy grew by 1.5% in 2015, and is forecast to grow by a further 1.4% in 2016, just below the Eurozone average of 1.6%. Unemployment now stands at 12%, down from a high of almost 18% in January 2013. As part of its bailout package, Portugal was required to implement structural reforms to improve long term growth, productivity and competitiveness while reducing its deficit. Portuguese companies have increasingly focused efforts to grow their business abroad. This has fuelled exports, which are up 29.3% since 2010. New incentives for inward investment into Portugal’s residential markets were developed, helping to revive the residential sector and one effect of the financial crisis was to foster greater entrepreneurship, and Lisbon has emerged as a centre for tech companies and start-ups. The report explains that historically Portugal’s leasing market was protectionist, pro-tenant and gave little incentive for landlords to enter the market. As a result, Portugal’s home ownership rate is high, with an owner occupation rate of 75%. In 2012, the government introduced reforms to the leasing market, leading to greater flexibility in lease terms and, making the investment market more appealing to investors. This quickly attracted the attention of new developers and institutional investors. Improved market conditions have also fuelled big ticket commercial investment volumes. In total, $1.96 billion (€1.71bn) was invested into Lisbon’s commercial markets in 2015, of which $1bn (€0.87bn) came from the United States. Investors from the UK, Spain, Singapore, Switzerland and Germany, among others, have also been active in the last four years. Portugal launched one of the world’s most successful golden visa schemes in 2012. A minimum investment in real estate of €500,000 grants the non-EU buyer a visa and, in the longer term, a route to an EU passport. Foreigners need only be resident in Portugal for seven days in the first year of residency. By January 2015, the scheme had brought €1.56 billion of new investment into Portugal’s residential markets, the bulk into Lisbon. Some 2,697 golden visa residence permits have been… Continue reading
