By Daniel Hunter
2013 will mark the bottom of the UK commercial property market, according to the latest real estate predictions from Deloitte.
While it is expected that recovery will not be evident until later in the year, the downward trend in commercial capital values should halt as investors widen their focus outside of core markets.
The findings go someway to support the findings of the Halifax, who predicted that the housing market will remain fairly stable in the coming year.
Anthony Duggan, partner and head of real estate research at Deloitte, said. “Our prediction that we’ll reach the bottom of the market this year could be seen as heroic given the uncertainties in the global, European and UK economies but we believe there are enough compelling reasons to support the idea and expect that investors will increasingly be looking for opportunities outside the narrow focus on prime property we have seen most concentrate on over the last few years.”
Andy Rothery, head of Deloitte Real Estate, said: “Along with the utilisation of alternative lending streams, we expect to see the UK commercial and residential markets boosted by more than £20bn of investment coming from overseas in 2013. The inflow of foreign capital buying real estate is set to exceed that recorded in 2012; coming from both established players and more new entrants. Many overseas investors are looking for stable, income producing assets with bond-like characteristics. The UK is well placed to meet such needs and we expect that the appeal of the real estate to overseas capital will remain.”
In terms of construction activity, the report predicts that while activity will remain low across the UK, it will be supported by development driven from the higher education sector. Duggan added: “Public sector funding is supporting the development of new facilities, other universities are working hard to enhance the ‘student experience’ as they compete for students from both the UK and overseas, and student housing remains attractive to many investors. We expect 2013 to be a big year for construction in this sector in the face of low levels of construction in general.”
Looking to the private sector, the evolution of modern technology is having an impact on retail and office space. Duggan continued: “Deloitte data shows that almost six per cent of store sales were influenced by smart phones in 2012, equating to £15.2bn of consumer spend and this influence is rising rapidly. This poses significant questions to retailers with regard to their store portfolio relating to factors such as store size and configuration as well as location.
“Similar changes can be seen in the office market where a need to reduce build costs alongside flexible working practices such as activity-based working, cloud computing and ‘bring your own device’ schemes are altering the way that office buildings might be built in the future. Working from home practices, wireless technologies and hot-desking schemes are also reducing the amount of space needed per worker, pushing a change in occupier requirements.”
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