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Commercial property market helps UK top the G7 leaderboard | 26 February 2015

Commercial property market helps UK top the G7 leaderboard | 26 February 2015

The UK’s 2.6 per cent growth rate has placed in pole position for the G7-leading nations, offering its commercial property market a significant leg-up in the process.

That’s according to The Organisation for Economic Co-operation and Development (OECD), which claims in its latest report that a key challenge over the coming years will be to sustain economic expansion and further progress in living standards. It argues that housing supply has not met demands as it should, while the rise in house prices is putting more pressure on the financial stability of residents, bbc.co.uk notes.

Yet for all these demands, such a high growth rate presents opportunities for property investors. As well as contributing to residential developments that help aid a rise in UK living standards, it’s also never been a better time to invest in UK commercial property; right now there are more businesses forming than ever before. Entrepreneurs have healthy, sufficient bank balances, but there’s an insufficient amount of workspace, storage, and manufacturing areas.

The demand for workspace is only going to rise, as will the value of commercial property. Therefore, the building of new developments could see investors enjoy high commercial rents for the lowest investment, iexpats.com argues.

Bolstering this argument is the fact that, according to the latest government figures, wages rose by 2.5 per cent in the past year. There are also more people in work, leading to more demand for both residential and commercial property.
“We expect commercial property values to keep rising for the rest of the year,” said Richard Levis, an analyst at insurance giant Aviva. “Annual returns are heading for the 18 per cent mark when rental income and capital growth are combined for gross yield.”

However, it’s possible that the entire market could change in 2016 to see commercial property returns derived from rents instead of capital growth, as a spokesperson for the Aberdeen Property Trust explains.

“Some places, especially London and the South East are expensive and this boost in property values is pushing down yields,” they noted. “We are looking away from the capital and at properties with strong rental prospects because we believe rising prices will start cooling in a year or so.”

The views expressed in this post are those of the author and are not necessarily those of Qube Global Software. All facts are verified where possible directly by the author.

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Philippa Cunningham
Posted by Philippa Cunningham
+44 (0) 20 7726 3200.
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