United Kingdom Real Estate Report Q4 2014 - New Market Research Report

The UK commercial real estate market is well placed for further expansion over H214 and into 2015 as a strong economic rebound supports demand for office and retail space in particular. The industrial segment will remain the underperformer as export activity continues to flag.

Falling unemployment and increased levels of household spending have provided support for rental rate growth in the two segments. While we expect the office segment and high quality retail space to outperform, rental growth in the industrial segment is expected to remain largely the same. This is because demand for manufacturing space has declined as the UK de-industrialises and a sluggish eurozone recover demands export demand. However, a lack of supply in logistics and other retail facilities means that rental rates for the industrial market are likely to hold steady over the coming quarters, while at the lower end of the market, significant opportunities exist in the high-growth industrial space such as urban and edge-of-town distribution centres for small load deliveries as e-commerce evolves.

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We believe near-term value driver continues to be in the office segment in central London but the positive growth momentum will gradually transit to the retail sector as retail spending drives higher occupancy and rents in quality shopping malls. Futhermore, speculative investment in the Central London Office market has led to growing concerns of oversupply, while the capital has recently overtaken Hong Kong as the most expensive location for international firms to base staff, according to a recent study.

We note the increasing regionalisation of the UK commercial real estate sector as firms look to diversify rental and investment activity away from the capital in an effort to lower costs. H114 saw particular growth in office take-up in Manchester in particular, while smaller regional markets, such as Cardiff have also witnessed strong growth in leasing activity.

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The United Kingdom Real Estate Report features Business Monitor International (BMI)'s market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.

BMI's United Kingdom Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in United Kingdom.

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