“Technology is breaking down traditional social barriers – replacing them with an ethos of collaboration and transparency”
Author of ‘The Revolution Will Be Digitised’
Property and equity returns converge
Property returns confounded expectations in 2017, finishing the year at 11.2%, up from 5.1% in the middle of the year.
Consensus forecasts for the property market stood at 8.2% in IPF’s November UK Consensus Forecasts publication, illustrating how most analysts underestimated the strength of the market.
Office returns (8.5%) were slightly behind the All Property average, which was boosted by a strong performance in the industrial sector (21.1%).
On the counter side, equity returns fell back to 13.1% for the calendar year from a peak of 24.5% in May 2017.
The IPF Consensus forecasts for 2018 anticipate a slowing, with returns down to 4.0%.
Investment activity remains buoyant
Investment market activity has remained resilient in 2017, with total transactions of £62.1bn, 27% higher than the previous year.
Overseas investors were the most active purchasers in the market, accounting for 47% of overall investment and they were the only net investors into the UK market.
Domestic investors continued to reduce their exposure to the UK market. Institutional investors were net sellers to the tune of £1.2bn, whilst UK property companies (both quoted and private) sold a net £6.3bn.
The two largest transactions along the ‘knowledge corridor’ have involved overseas investors, with the Canadian Pension Plan Investment Board purchasing a 50% stake in Milton Park, Oxford for £200m and US group TPG Real Estate acquiring Oxford Business Park, through their purchase of Arlington Properties, for £450m.
Investment in the ‘knowledge corridor’ is under pinned by strong fundamentals
Increased investment in the 'knowledge corridor’ and other provincial markets has been supported by the continued strength of the occupational market.
Over the past five years, total office and lab take up in Bidwells’ primary markets has totalled 8.6m sq ft, with total office occupancy increasing by almost 3m sq ft.
Demand for office and lab floor space across the Bidwells region stood at 3m sq ft at the end of 2017.
Rents are expected to reflect the continued strong demand for office and lab space, with Bidwells’ forecasts anticipating growth of 2.3% p.a.