UK Commercial Property has had a torrid few years but it continue to emerge from the ashes and outperform everyone’s expectations.
Office space has seen a strong take-up in the second half of 2017. The commercial property sector smashed all expectations. But the performance of retail property was less positive following the worldwide trend caused by the change in peoples shopping habits.
Overall, the total return from UK commercial property in 2017 was 10.3 per cent.
This is outstripping even the most bullish of expectations.
Demand for offices held up, increasing by 19 per cent on 2016. This segment received a major boost by the presence of the serviced office sector in London, in particular WeWork.
But the retail sector is still facing headwinds including consumer confidence, meaning demand is slowing for traditional shops.
The report also suggested that the spate of company voluntary agreements (CVAs) in recent months could shift the power balance away from property investors in the sector.
New Look, Byron, Jamie’s Italian, and Prezzo have all entered into the process to restructure their portfolios. They are asking some landlords to agree to rent reductions and closing some sites.
But there is a bright spot in industrial space. UBS says has a growing role in the increased levels of home delivery. Rents on smaller warehouses in South London are thought to have increased a whopping 50 per cent over the last year due to the demand for last mile fulfillment.
Total returns for the logistics property sector reached 21 per cent last year. Returns are expected to be maintained at an average of 7.7 per cent for the next two-year period.