Economic uncertainty has negative impact on UK commercial property, says Colliers

By Bridging Loan Directory -

The latest Property Snapshot from Colliers International suggests that the UK commercial property, including prime assets, is being impacted negatively by worldwide economic uncertainty reports Property Funds World.

Despite high levels of corporate liquidity, uncertainty and fresh concerns about UK economic prospects and the potential for a Eurozone triggered financial crisis, is inhibiting business expansion and household spending.

Transaction levels improved in September, but year-end volumes may be held back as buyers review pricing in the prime end of the market. Funds are also cautious and not likely to commit without seeing real value.

Households continue to exercise caution as new economic uncertainties come to the fore. Retailers were not heartened by the UK Prime Minister’s suggestion that consumers pay down debt on credit and store cards, especially with Christmas approaching.

A bedrock of small to medium sized lettings continues to support the Central London market, although the conversion of large Grade A requirements in core areas is sluggish. Regional markets continue to improve slowly.

Sector continues to stabilise. Supermarkets and internet distributors are absorbing the remaining Grade A space. Large operators are taking smaller units on short leases to satisfy requirements. Pre-lets and D&Bs are still making only a small impact.

House prices remain generally stable. Mortgage lending will remain tight, although funds are available for higher LTVs, but at a price. London continues to outperform, pressured by foreign buyers whose appetite for prime is undiminished.

Dr Walter Boettcher, Director, Research and Forecasting at Colliers International, said:

“In response to the much weakened UK economic profile and, no doubt, eurozone fallout worries, the MPC has extended quantitative easing by an additional GBP75bn. While a new round of quantitative easing may impact positively on general sentiment, the real task is to encourage the large highly liquid corporates to begin investing in business expansion. In the absence of this type of investment, quantitative easing is only likely to make a marginal impact on UK economic recovery.

“Consumer confidence is not improving. Wage growth remains very weak and household disposable income continues to contract. The Gfk NOP CCI has been -30 or lower for three consecutive months and the high street is also under pressure as consumers increasingly shop on line. ONS numbers for August show a 0.1% y/y decline in retail sales (ex-petrol), while non-store retailing grew by 13.8%. Internet shopping has seen double-digit year-on-year growth for nine straight months. BRC report a 0.3% rise in UK retail sales in September.”