UK commercial real estate sector not set to recover until 2023


By Daniel Hunter

Despite latest GDP figures confirming that the UK is officially out of recession, the country’s construction industry still faces a challenging trading climate.

A major new study published today (Tuesday) has revealed that Britain’s commercial real estate market will not return to pre-crisis levels until 2023, having experienced a staggering £13 billion drop in output values since 2007.

The Castles in the Air report, released by RSA, the UK’s largest commercial insurer, and the Centre for Economics and Business Research (Cebr), is a unique study of the future of UK commercial real estate (CRE) construction. It shows that the recession has led to a peak-to-trough decline of 42 per cent in CRE construction output, which closely follows GDP.

In fact, between 2007 and 2011 the value of CRE construction activity fell by as much as 32 per cent from £41 billion to £28 billion. Looking forward, this figure is predicted to drop again in 2012 to £27 billion and is not expected to return to positive growth until 2014, when only a modest 0.3 per cent rise is anticipated — far below the rate of growth currently reported on a national level.

The decline seen at a national level is echoed across the UK regions, although a North-South divide is clear. Scotland and the North West have been hardest hit by the downturn, experiencing sharp 51 per cent and 49 per cent drops respectively. At the same time, London and the South East have shown more resilience, with smaller falls of 16 per cent and 24 per cent, respectively.

“The commercial real estate sector has been hit hard by the recession, and with CRE construction growth so closely tied to GDP, it’s not surprising that we’ve seen such a sharp decline in output values since 2007," Paul Greensmith, RSA’s Director of... continued on page two >


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