2019

SPOTLIGHT Savills Research

Economic overview The office market Prime residential Foreword & Summary

Summary

■ Records were broken in the office investment markets in 2018. The sale of ’s Gaspé House, for £90m, marked the largest ever single commercial property transaction in the Channel Islands. The sale of IFC 1, meanwhile, set a new Foreword sub 6% yield benchmark. ■ Office rents in The investor base in the Channel Islands’ are stable real estate markets deepens at £43 per sq ft, and have risen to £36 per Stable, self-governing jurisdictions, buoyant, with rising transaction sq ft in Jersey. Grade A Jersey and Guernsey are both volumes supporting price growth. office yields remain at respected international financial Set against steady in-migration, a premium to UK offices, centres that punch well above their Jersey’s market continues a they now stand at 6.25% weight on a global stage. They strong run, while Guernsey’s has in Guernsey and 6% offer residents a high quality of life picked up after several slow years. in Jersey. in a business-friendly environment. Guernsey’s Open Market These characteristics make the returned to growth last year and ■ Prices and the volume islands attractive places in which Jersey’s prime market remains of transactions in the to live, work and invest. Following resilient. Interest in the islands islands’ residential a slew of new office development from HNWIs has increased against markets are rising. in Jersey, substantial investment a backdrop of Brexit and general Last year, the number grade stock came to market in political uncertainty in the UK, but of transactions in 2018, and new investment records many buyers from the UK have Guernsey’s reached their have been set. adopted a ‘wait and see’ highest levels since 2011. The pool of commercial approach. We expect clarity, Prices grew by 3.5% in investors targeting the islands when it emerges, to unlock some Jersey, and 4% in is deeper than ever before. In pent-up demand. Guernsey in 2018. a worldwide search for income, investors are having to hunt ■ The prime markets harder for returns, something of both islands are the Channel Islands office characterised by markets offers. Paul Tostevin elevated levels of The mainstream residential +44 (0)207 016 3883 supply at the highest markets of both islands are [email protected] price points. More realistic vendor expectations have helped to boost transactions in Guernsey.

2 3 Economic overview Economic overview

£319.9bn £281.7bn

Value of funds under Guernsey Jersey administration in 2018

Economic overview Funds under administration have risen steadily in the last five years As self-governing jurisdictions, Guernsey and Jersey funds under administration Jersey bank deposits Guernsey funds under administration Guernsey bank deposits Jersey have the power to shape their futures £350

£300 Jersey and Guernsey are well fiduciary and insurance. In 2018, economic base. Fintech and established financial centres. The the value of funds under administration e-gaming are emerging niches, £250 sector remains the islands’ primary in Guernsey stood at £281.7bn, an combining financial expertise £200 economic generator, accounting for 21% increase of 28% since 2014, and at with new technology. of employment and approximately 40% £319.9bn in Jersey, growth of 66% since With a legacy of growing flowers, £150 of their GVA. Total financial services 2013. Banking deposits have stabilised fruit and vegetables for export, the billions value, Total employment has risen by 7% in Jersey following a decline from a 2008 peak islands have extensive horticulture £100 in the last five years, and by 4% in (see chart below). infrastructure in place which is £50 Guernsey over the same period. As self-governing jurisdictions, beginning to be revitalised for new The islands continue to diversify Guernsey and Jersey have the power purposes, including the production £0 their financial service offer. In recent to shape their futures, and are making and processing of Cannabidiol (CBD) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 years growth has been driven by funds, efforts to further diversify the products, now a licensed industry. Year-end figures, apart from Guernsey bank deposits which are as at Q3 2018. Source Savills Research Key economic indicators 2018, unless specified S&P Sovereign Credit Rating Guernsey Jersey Guernsey Annual change Jersey Annual change Long term rating AA- / AA- /

Population 62,307^ 0.4% 105,500* 1.2% Short term rating A-1+ A-1+

Net migration +274 +1,200* Guernsey and Jersey in the world GDP £3.05bn* 2.0%^^ £4,3bn* 0.4%^^ Guernsey and Jersey are self-governing are part of the OECD under the UK’s GDP per capita £48,950 £40,790 Crown Dependencies. They each have their membership. Both Jersey and Guernsey own directly elected legislative assembly, access the EU Single Market via third country Employment 31,210 -0.2% 61,930 0.5% administrative, fiscal and legal systems, and provisions and signing agreements outside of own courts of law. UK-EU relationship. Financial services 6,846 (21% of total) 0.0% 13,280 (21% of total) 0.4% Islanders have British nationality, and are Both islands’ finance industries can expect employment part of the Common Travel Area of the British their relationships with the EU to continue Isles. , through the UK Government, structurally unaffected, post-Brexit. The UK ^Mar 18 *2017 ^^ real is responsible for the island’s defence and remains the Channel Island’s major trading Source Savills Research using States of Guernsey and States of Jersey formal international relations. partner however, so the UK’s future relationship The islands have never been part of the EU, with the EU, and the impacts on its economy, In recent years growth in financial services has but are part of the EU Customs Union. They still has a knock-on effect on the islands. been driven by funds, fiduciary and insurance

4 5 Office market Office market

Jersey’s office stock totals around 3 million sq ft and Guernsey totals around 1.7 million sq ft Office markets Prime headline office rents, trend Office market New records have been set in the Channel Islands office investment markets, Guernsey Jersey Manchester Birmingham Bristol outlook supported by a deeper pool of international capital £45 ■ A shortage of As established international centres investors look to the islands, attracted Supply and take up supply will continue of business and finance, Jersey and by comparatively high returns, new Guernsey hasn’t seen any new £40 to characterise the Guernsey have a strong occupier base investment-grade stock, long leases and office construction since 2011 and Guernsey office of multinational occupiers providing good covenant strengths. Institutional there is now a shortage of Grade A office market. Planning £35 excellent covenant strengths. investors and private funds are present, space on the island. This means that permission is in place Jersey’s office stock, totalling around as well as HNWI investors. options for existing and new occupiers for a 61,000 sq ft office building at Admiral 3 million sq ft, is focused in St Helier, In November 2018, Jersey’s Gaspé are extremely limited, but has worked in £30 with substantial Grade A office buildings House was sold by Savills on behalf of landlords’ favour, sustaining rents at Park, but it requires a

added to the Esplanade and International Dandara to a Seaton Place Ltd for £90m, £43 per sq ft. foot per square Rent significant pre-let to Financial Centre (IFC) in recent years. the largest ever single commercial property The leasehold take up of prime offices £25 commence. Longer Guernsey’s office stock is concentrated transaction in the Channel Islands, at a in Guernsey was in the region of 50,000 term, the island’s in St Peter Port, the Glategny Esplanade, net initial yield of 6.16%. The sale of the sq ft in 2018, with a further 15,000 sq ft government is aware of and Admiral Park, a mixed-use business 164,000 sq ft building attracted interest taken by owner occupiers. £20 the lack of developable 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 park. Office stock in Guernsey totals from a wide range of institutional and St Helier’s flat topography and better space, and beginning around 1.7 million sq ft. HNWI investors from around the world. availability of development land has Source Savills Research to explore opportunities Take up in both islands has The same month, the sale of IFC 1 for enabled the delivery of some substantial to address this. Prime office rents and yields, selected cities predominantly come from on-island £42.7m set a sub-6% yield, underlining new office buildings in recent years. New businesses transitioning from older the strength of the commercial property construction, focused at the Esplanade ■ Jersey saw and lower specification buildings into investment market on the island. and the IFC, is reflected in take up Prime rent Prime yield Retail exceptionally high per sq ft new, BREEAM rated, offices or newly In April 2019, Guernsey’s Dorey Court volumes which we estimate at 140,000 St Helier and St Peter Port levels of take up last refurbished offices. Requirements and Martello Court, totalling 89,000 sq sq ft in these areas alone last year. £21 7.00% are successful retail centres, year, driven by the have been the result of organic growth, ft, were sold, again by Savills, to a private Tenants have had a choice of buildings but in common with other completion of three mergers or acquisitions. overseas buyer in April 2019 for £60.65m, and developers have had to work hard locations, the shift to online major office buildings Guernsey £43 6.25% at a net initial yield of 6.35%. to entice occupational tenants. Rents shopping is changing the nature within 12 months of Investment Prime yields have moved in, and stand are lower than in Guernsey, but of demand. Many UK internet each other, and the The investor demand base for office at 6.25% in Guernsey and 6% in Jersey. increased steadily since 2011 to an Jersey £36 6.00% retailers automatically deduct consolidation of some investment is deepening in the Channel Yields are still, on average, more than average of £36 per sq ft in 2018. 20% UK VAT for Channel Island major occupiers. We do Islands, with major investment sales 100bps higher than UK regional offices, Both islands are characterised Manchester £34 4.75% residents, making online not expect levels to be attracting bidders from the Middle and substantially higher than some by low vacancy rates among Grade A shopping in the islands attractive. sustained at this level in East and Asia for the first time. European and Asian global financial stock, at 5% in Jersey, and just 2% Nonetheless, there are few 2019, particularly now London (City) £77 4.00% Market liquidity is improving as new centres (see chart). in Guernsey. significant voids on the main there are no major office high streets, aside from a unit completions in 2019. Luxembourg £45 4.00% Major Channel Islands investment sales vacated by Next in St Helier’s King Street, following relocation ■ With more investment Date Address Key Tenants Price Sq ft NIY Purchaser London (West End) £103 3.50% to a larger store. Recent new grade office stock in the Apr-19 Dorey Court & ABN AMRO, £60.65m 89,000 6.35% Private entrants include Schuh and islands and increased Martello Court, Aon Insurance, overseas Superdry in Guernsey, and USC investment activity, St Peter Port, Royal Bank of buyer Singapore £65 3.50% Guernsey Canada in Jersey. Rents are likely to a deeper pool of track downwards, however, as investors is attracted Nov-18 Gaspé House, St Royal Bank of £90m 164,000 6.16% Seaton Geneva £56 3.00% retailers continue to evolve their to the market than ever Helier, Jersey Canada, First Names Place Ltd models and consolidate their before. Yields may Group, Collas Crill, Paris £66 3.00% brick and mortar operations. move in further as Deloitte Food and beverage (F&B) investor competition continue to be important retail increases, but pricing Nov-18 IFC 1, St Helier, Jersey BNP Paribas, UBS £43.7m 70,400 5.94% Private Frankfurt £39 2.90% buyer occupiers and remain a bright will still be attractive Dec-17 37 Esplanade, PWC, KPMG, £45m 88,500 6.65% Private spot; the islands have a vibrant compared to other Hong Kong £88 2.60% St Helier, Jersey Volaw, Canaccord, buyer restaurant and bar scene. major centres. First Names Group Source Savills Research Source Savills Research 6 7 Residential Residential

Residential prices rose by 3.5% in Jersey in 2018, 3.5% 4% and by 4% in Guernsey’s Jersey Guernsey local market last year

Residential markets Jersey saw continued growth in 2018, while transaction levels in Guernsey reached their highest levels since 2011

Jersey residential transactions by price band The Channel Islands offer residents an exceptionally high ■ Up to £500,000 ■ £500,000 to £1m ■ £1m to <£2m ■ £2m to <£3m ■ £3m to <£5m ■ £5m + quality of life in a business-friendly 1,400 environment. Safe and secure with excellent schools, recreation, 1,200 restaurants, and a combined 72 miles of coastline in the two main 1,000 islands, they are ideal locations to call home. 800 Host to businesses with international reach, they offer Guernsey residential transactions, Local and Open Market high-value employment, and a 600 Guernsey favourable environment to build ■ Local market ■ Open market 10 year average Guernsey’s mainstream residential

a business. Their compact size Number of transactions 400 market has returned to growth. Local 1,000 also means short commutes, Market residential transaction numbers contributing to a favourable 200 reached their highest levels since 2011, work-life balance. 900 while the Open Market hit an 11-year Jersey and Guernsey have 0 high. Taken together, market activity 2018 restrictions in place on who can 2014 2015 2016 2017 800 is now 14% above the 10-year average purchase and occupy residential Source: Savills Research using Royal Courts of Jersey data (but still 26% below 2007 levels). property. In Jersey, those who Jersey Local Market prices in Guernsey 700 are not locally born may qualify A growing economy, low mortgage interest stock and, in some cases, unrealistic vendor reached a trough in the first quarter of under the High Value Residency rates, and a shortage of stock have pushed expectations. The impact of ongoing 2018, following three years of price falls. (HVR) system, which requires a Jersey’s mainstream residential markets Brexit uncertainty has led to increased 600 But with transactions levels now rising, minimum annual tax contribution to new highs. Demand for both owner numbers of enquiries, but some prospective prices rose consecutively for the last of £145,000. A small number of occupiers and local buy to let investors purchasers originating from the UK have 500 three quarters of 2018, bringing annual ‘unqualified’ properties are also has resulted in a shortage of supply priced been adopting a ‘wait and see’ approach price growth to 4%, with an average available, that do not require HVR under £500,000, and transactions in this as political uncertainty plays out. 400 Local Market house price of £438,000.

status. In addition, Jersey has a price segment fell by 17% in 2018 as a result. Nonetheless, sales in excess of £15m have Number of transactions Open Market activity has been driven system in place for non-locals Meanwhile, domestic homemovers already been seen in 2019. by improved sentiment and more realistic 300 deemed essentially employed. have fuelled activity among property One beneficiary has been the prime pricing from vendors. A tax cap for new In Guernsey, 1,600 properties, priced between £500,000 to £1m (+31% in rental markets, which many new arrivals Open Market buyers came into effect or 6% of the island’s housing stock, transactions in 2018) and the £1m to <£2m have turned to as they establish themselves 200 in 2018, acting as another incentive. are classed as ‘Open Market’ and bracket (+47% in transactions). on the island. The mainstream rental Some 75 Open Market transactions available for any UK or EU national Sustained demand continues to push up markets are buoyant too, this is, in part, 100 were recorded in 2018, levels not seen to buy (or other nationals via a prices, which rose by 3.5% in 2018. The mix- due to affordability constraints in the since 2007 when 96 Open Market sales special Entrepreneur or Investor adjusted average price reached £491,000, sales markets, coupled with demand from were recorded. Like Jersey, political 0 visa). The rest, designated as ‘Local 14% above their former 2008 peak. people moving to the island for work. uncertainty in the UK has led to 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Market’, are for those born locally, For property priced over £3m, the market Advertised private sector rents increased increased enquiries, rather than many or with an employment licence. has slowed, the result of high levels of prime by 9% in 2018. Source Savills Research using Unusualities of Guernsey more movers.

Sustained demand in Jersey continues to push Local Market residential transaction numbers in up prices, which rose by 3.5% in 2018 Guernsey reached their highest levels since 2011

8 9 Residential

Political clarity in the UK, when it emerges, may unlock some pent-up demand in the islands’ prime residential markets

Residential price comparison: Jersey, Guernsey, London and UK mainstream markets

Jersey* Guernsey (Local Market)* London UK £500,000

£450,000

£400,000

£350,000

£300,000 Price £250,000

£200,000

£150,000

£100,000 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

*Four quarter rolling average Source: Savills Research using States of Guernsey, States of Jersey and UK Land Registry

Residential market outlook

■ ‘Pull factors’, such as a high ■ Demand for prime property ■ Guernsey’s population is quality of life and favourable in both islands depends on forecast to increase by just 3% business environment, rather their ongoing appeal to high to a maximum of 64,000 people than ‘push factors’, such net worth individuals as a place by 2034. In Jersey, if the current as Brexit, attract most to live and build a business. rate of in-migration is sustained, individuals to the Channel Government is proactive in its population is forecast to Islands. However, we expect this respect, new business and reach 128,000 in 2035, an clarity on the political situation individual movers are supported increase of 21%. This, combined Savills Research in the UK, when it emerges, to by government-funded with a shortfall of new homes We monitor global real estate markets and the forces that shape them. Working with our teams unlock some pent-up demand organisations Locate Jersey (estimated at 2,750 dwellings across the globe, and drawing on market intelligence and published data, we produce a range in the Guernsey and Jersey and Locate Guernsey, who over the next three years alone) of market-leading publications, as well as providing bespoke research to our clients. prime residential markets. also promote the islands’ offer. will support growth in Jersey’s residential markets. We expect prices in Guernsey to continue Savills Research to recover as transactions return Paul Tostevin to longer term trend levels. Director +44 (0)207 016 3883 [email protected]

Savills Channel Islands Tony Rowbotham Geri O’Brien Richard Fox Keith Enevoldsen Director Director Director Director Commercial, Guernsey & Jersey Residential, Jersey Open Market Residential, Guernsey Local Market Residential, Guernsey +44 (0)1481 742 288 +44 (0) 1534 870 143 +44 (0) 1481 713463 +44 (0) 1481 713463 [email protected] [email protected] [email protected] [email protected]

Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK, continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.

10 11 Jersey Guernsey Residential Guernsey Commercial 19 Halkett Place 1 Le Truchot 22 Smith Street St. Helier Guernsey St Peter Port JE2 4WG GY1 1WD GY1 2JQ +44 (0) 1534 722 227 +44 (0) 1481 713 463 +44 (0) 1481 742 280

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