Home Lead Story UK Real estate recovery set to be faster than previously predicted

UK Real estate recovery set to be faster than previously predicted

by LLP Editor
12th Jul 21 11:56 am

The UK property market is now on track for a swifter recovery than CBRE predicted six months ago, the company said today as it unveiled its updated mid-year forecasts for the remainder of the year.

As the economy strengthens, CBRE expects strong GDP growth in Q2 and above-average growth rates for the rest of the year (7.7% for 2021 as a whole), with UK GDP returning to pre-pandemic levels by the end of 2021, six months earlier than originally forecast.

Whilst not all sectors have yet returned to full health, the logistics and the multi-family residential sectors have led the recovery and are already reaching record highs. Already in 2021, the vacancy rate for logistics property has compressed even further to below 4%, with XXL units (those over 500,000 sq ft) particularly scarce. Despite the limited supply, CBRE predicts both logistics leasing and investment will experience an even busier second half of the year than the first.

Logistics investment volumes soared by 122% in Q1 2021 compared with Q1 2020 and the firm predicts that online retail sales growth alone will necessitate an additional 59m sq ft of e-commerce-dedicated logistics space in the UK between now and 2025.

Tasos Vezyridis, Head of Logistics & Retail Research, CBRE commented: “Driven principally by consumer buying habits over the course of the pandemic, demand for logistics property has reached record levels, which we expect to continue.

“Following a further compression in prime yields during Q1 2021, investors and landlords will now be focusing on opportunities for rental growth given low vacancy rates and a relatively healthy development pipeline.”

In the residential sector, CBRE forecasts that a very strong market will soften only slightly as the Government’s stamp duty holiday and other forms of pandemic-related support, begins to taper away. Even so, CBRE expects house price growth of 5.9% in calendar year 2021, compared with 10.9% in the year to May 2021.

Investment in the institutional multifamily residential sector for 2021 has already reached £4.2bn, the best on record, with a further £1.5bn of deals under offer.

Jen Siebrits, Head of CBRE UK Research said: “The resilience and strong performance of the residential sector throughout the pandemic is driving a wave of capital to the sector. As such, we expect investment to remain strong throughout 2021 and beyond.”

The firm also expects all UK commercial real estate investment to increase by 26% to £53bn by end 2021 (2020: £42bn), broadly matching the levels achieved in 2019 (£53bn), though still some way off the record UK high achieved in 2015 (£70bn).

CBRE anticipates further regulatory action on climate change as Glasgow hosts the COP26 climate talks in November, and as real estate decision makers focus on the implications of the UK’s new 2035 emissions reduction target. There will be a particular emphasis on wider and deeper reporting of real estate emissions, and the development of a UK Green Taxonomy.

Julie Townsend, Head of Environmental Consultancy, CBRE commented: “With the UK Government’s commitment to placing climate-related financial disclosures and greenhouse gas emissions targets on a legally-binding footing, and the US’s renewed commitment to the Paris Agreement, the need to mitigate real estate’s carbon emissions and adapt buildings for an inevitably warmer planet has shot up the agenda for CBRE’s UK clients.”

“CBRE expects a barrage of new regulatory announcements from the UK Government over the months leading up to COP26 climate talks in November, including on better and deeper reporting and disclosure of emissions by big firms. We will also see progress on the development of a UK Green Taxonomy, which could label certain aspects of real estate, and real estate transactions, as ‘not environmentally sustainable’ for the first time.”

 

You may also like

Leave a Comment

CLOSE AD

Sign up to our daily news alerts