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United Kingdom Real Estate Report Q2 2011
Business Monitor International, March 2011, Pages: 66
United Kingdom Real Estate Report Q2 2011 - For the UK's commercial real estate sector 2011 is likely to be, in general, a similar year to 2010. Rental rates and yields have stabilised after the difficult period in the wake of the global financial crisis. The latest round of interviews with in-country sources, in late 2010, confirmed that rental rates have been rising in Manchester and Glasgow – across the office, retail and industrial sub-sectors. However, H210 saw softening in rental rates – which eliminated some (or all) of the gains that had been made in H110.
London landlords have had to contend – directly and indirectly – with the problems of the financial services sector (which has since enjoyed a temporary boost to its fortunes as a result of the extraordinary easing in monetary policy by central banks around the world before, during and after the global financial crisis). At the margin, the relocation of businesses from London to cheaper parts of the country must also be having an impact on the commercial real estate market.
As was the case in our interviews in mid-2010, it was clear that over-supply of property, thanks to developments that were commenced prior to late 2008, is more of an issue in the capital than it is elsewhere. However, the UK's commercial property sector as a whole is not overly burdened by excess supply.
Both over the coming year and the forecast period as a whole, we anticipate that yields for commercial real estate in the UK will basically track sideways. Rental rates and capital values will, for the most part, move together. In the short-term, our in-country sources indicate that they are not looking for yields to change much over the next year or so. Yields have adjusted to the post-crisis economic environment in the UK.
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