Commercial Property - UK - June 2018 The above prices are correct at the time of publication, but are subject to Report Price: £995.00 | $1343.55 | €1119.77 change due to currency fluctuations. “The short-term outlook for the UK commercial property market remains cautiously optimistic, with growth of 1% in real terms predicted for 2018. However, there is some disparity between major sectors, with industrial and alternative assets expected to outperform, while sentiment in the retail sector continues to weaken.” – Claudia Preedy - B2B Analyst This report looks at the following areas: BUY THIS • How have key sectors of the commercial property market performed over the last few REPORT NOW years? • Who are the biggest investor types in the key sectors of the commercial property market? • Which sectors of the market are most attractive to investors? VISIT: • Where is the market headed? store.mintel.com CALL: EMEA +44 (0) 20 7606 4533 Brazil 0800 095 9094 Americas +1 (312) 943 5250 China +86 (21) 6032 7300 APAC +61 (0) 2 8284 8100 EMAIL: [email protected] This report is part of a series of reports, produced to provide you with a DID YOU KNOW? more holistic view of this market reports.mintel.com © 2018 Mintel Group Ltd. All Rights Reserved. Confidential to Mintel. Commercial Property - UK - June 2018 The above prices are correct at the time of publication, but are subject to Report Price: £995.00 | $1343.55 | €1119.77 change due to currency fluctuations. Table of Contents Executive Summary The market Commercial property market demonstrates solid performance in 2017 Figure 1: Value of UK commercial property market, 2009-17 Investment market supported by continued influx of overseas buyers and a better than expected economic performance in 2017 Figure 2: Investor-owned share of UK commercial property market, 2013-17 Retail remains largest sector of commercial property market Share of office sector rises to 31% in 2017 Industrial property outperforms all other major sectors in 2017 Investors continue to be attracted to ‘alternative’ assets Outlook for industrial and ‘other’ commercial property market remains positive, but sentiment in retail sector weakens Figure 3: Segmentation of the UK commercial property market, by sector, 2013-17 Market factors Record low interest rates provide positive impetus for investment market, but hikes are on the horizon BOE downgrades economic growth forecast for 2017 Business rate hikes contribute to woes faced by retailers Companies Overseas investors are the largest investor type in the UK commercial property market Institutional investors are the second largest investor type Real Estate Investment Funds (REITs) dominate shopping centre sector Figure 4: Holdings in commercial property market, by investor type, 2017 What we think Key Insights What is the impact of Brexit on the UK commercial property market? What is the short-term outlook for the key sectors of the commercial property market? Why are ‘alternative’ commercial property assets becoming more popular with investors? Which assets attract the most attention? Introduction Definitions Methodology Abbreviations Market positioning The commercial property performance cycle UK Economy Overview Figure 5: Forecast GDP development 2017-22 Figure 6: UK GDP quarterly development, 2004-18 VISIT: store.mintel.com BUY THIS CALL: EMEA +44 (0) 20 7606 4533 Brazil 0800 095 9094 Americas +1 (312) 943 5250 China +86 (21) 6032 7300 REPORT NOW APAC +61 (0) 2 8284 8100 EMAIL: [email protected] Commercial Property - UK - June 2018 The above prices are correct at the time of publication, but are subject to Report Price: £995.00 | $1343.55 | €1119.77 change due to currency fluctuations. Inflation House prices Figure 7: UK house price changes, 2007-18 Interest rates Consumer spending Manufacturing Figure 8: UK manufacturing, 2014-18 Business investment Figure 9: UK GFCF 2003-17 Imports Exports Market Factors Key points Economic factors UK Purchasing Manager Index (PMI) for Services Industries UK Manufacturing Purchasing Manager Index (PMI) Retail sales and rise in online sales Figure 10: Growth of value of retail sales at current prices seasonally adjusted, 2011-17 Other factors Impact of planning laws on commercial property supply Supply and demand factors Latest business rates revaluation has biggest impact on London retail and office sectors Proposed to Capital Gains Tax (CGT) for offshore vehicles could dampen overseas investor sentiment Return on property investment Figure 11: Annual property returns, by sector, 2013-17 Government Hubs programme to boost regional office take-up in the short term New stamp duty rates for commercial property Non-residential property transactions Figure 12: UK non-residential property transaction completions, by country, 2013-17 Figure 13: UK non-residential property transaction completions, 2013-17 Private commercial construction output Figure 14: Long term trend in private commercial construction output in Great Britain, 1970-2017 Figure 15: Analysis of private commercial construction in Great Britain, by type, 2013-17 Private industrial construction output Figure 16: Long term trend in private industrial construction output in Great Britain, 1970-2017 Figure 17: Analysis of private industrial new construction work in Great Britain, by sector 2013-17 Market Size & Segmentation Key points Overview VISIT: store.mintel.com BUY THIS CALL: EMEA +44 (0) 20 7606 4533 Brazil 0800 095 9094 Americas +1 (312) 943 5250 China +86 (21) 6032 7300 REPORT NOW APAC +61 (0) 2 8284 8100 EMAIL: [email protected] Commercial Property - UK - June 2018 The above prices are correct at the time of publication, but are subject to Report Price: £995.00 | $1343.55 | €1119.77 change due to currency fluctuations. Commercial property investment market proves robust in 2017 ‘Alternative’ commercial property attracting increased interest from investors looking for secure, long-term income Figure 18: Value of UK commercial property market, 2013-17 Figure 19: Value of UK commercial property market, 2009-17 Figure 20: Investor share of UK commercial property market, 2013-17 Figure 21: UK commercial property floorspace and rental value, 2009-16 Market segmentation Segmentation by sector Figure 22: Segmentation of the UK commercial property market, by sector, 2013-17 Figure 23: Sector share of investor-owned commercial property stock, 2017 Segmentation by investor-type Figure 24: Holdings in commercial property market, by investor type, 2015-17 Figure 25: Investor commercial property market, by sector, South East and rest of UK, 2017 Office Sector Key points Overview Overseas investors drive growth in London office sector Shift away from owner-occupied offices Rise in demand for flexible workspace Investors look to prime regional office markets for investment opportunities London offices London office supply pipeline Regional office supply pipeline Figure 26: Capital value of the UK office market, 2013-17 Figure 27: UK offices market, by region, 2017 Figure 28: Office property transactions in Great Britain, 2013-18 Figure 29: Office Property transactions by investor type, year-to-date 2018 Figure 30: UK office floorspace and rental value, 2010-16 Retail Sector Key points Overview UK retail property sector undergoes major structural change, driven by online and multichannel retail Retail property owners continue to face considerable risks amid rising rate of retail failures and store closures Winners emerge out of the structural change Investor sentiment remains cautious in the retail sector Shopping centre developments embrace the leisure ‘experience’ economy Investors return to supermarket property after a few years of muted activity Figure 31: Capital value of the UK retail property market, 2013-17 Figure 32: UK retail property market, by sector, 2017 VISIT: store.mintel.com BUY THIS CALL: EMEA +44 (0) 20 7606 4533 Brazil 0800 095 9094 Americas +1 (312) 943 5250 China +86 (21) 6032 7300 REPORT NOW APAC +61 (0) 2 8284 8100 EMAIL: [email protected] Commercial Property - UK - June 2018 The above prices are correct at the time of publication, but are subject to Report Price: £995.00 | $1343.55 | €1119.77 change due to currency fluctuations. Figure 33: Retail property transactions in Great Britain, 2013-18 Figure 34: Shopping centre property transactions by investor type, year-to-date 2018 Figure 35: Retail warehouse property transactions by investor type, year-to-date 2018 Figure 36: Shop/supermarket property transactions by investor type, year-to-date 2018 Figure 37: UK retail floorspace and rental value, 2010-16 Industrial Sector Key points Overview Momentum in rental growth is maintained in 2017 Industrial & logistics continues to represent one of the most attractive sectors for investors Low levels of supply remain an issue in logistics Figure 38: Industrial speculative development under construction, February 2013-January 2018 Figure 39: Capital value of the UK industrial property market, 2013-17 Figure 40: UK industrial property market, by region, 2017 Figure 41: Industrial property transactions in Great Britain, 2013-18 Figure 42: Industrial property transactions by investor type, year-to-date 2018 Figure 43: UK industrial floorspace and rental value, 2010-16 Other Commercial Sector Key points Overview Investor appetite in UK hotels sector remains strong Operators to focus on maintaining and enhancing margins Budget and Four-Star hotels lead UK hotel development pipeline Figure 44: Active hotel development pipeline by grading, Q4 2017 Diverse leisure sector