A new report has shown property expert Simon Morris that an improved economy boosted the UK’s commercial property market to new heights in the past 12 months.
The economic recovery
The UK has resigned the recession to the annals of history. Figures from the BBC’s GDP tracker shows that the UK’s economy expanded by 2.6% last year; a rise from 1.7% in 2013. Despite the fact that economic growth for the first quarter of 2015 halved to 0.3% from the quarter before, it’ still expanding, which indicates that the UK is in for a bright 2015.
This means that the UK has become a desirable location to establish a business. Consequently, the country’s commercial property market has soared to new levels of success throughout the economic recovery. Returns on commercial property broke the 10% barrier in 2013 and 2014 and they’re expected to again in 2015.
Cluttons’ Commercial Property Market Outlook report
New analysis from property consultant Cluttons shows that the commercial property market has become more profitable in the last 12 months.
Cluttons’ Commercial Property Market Outlook report indicated that broad-based improvement in economic growth, coupled with low inflation sparked consumer and business confidence, which it said should lead to rental growth in the commercial sector where there is more demand than supply.
“Sheds are now matching offices for performance.”
The report also found that the industrial sector has had a particularly strong 12 months, meaning that it’s now recording similar performance rates to the lucrative office market. In the last year, offices recorded returns 23% and capital growth of 16%. In contrast, the industrial market recorded returns of 22.7%, which was facilitated by capital growth of 15.1% which was primarily spurred through yield compression.
John Barrett, the head of valuations of Cluttons explained why the industrial sector has had such a strong year. Barrett noted that “as we forecast last year, sheds are now matching offices for performance. One reason is that prime logistics take-up has improved over the past year, driven by manufacturers, especially in the automotive sector, and retailers with supply constraints in key locations.”
Barrett was quoted by Property Wire continuing that “apart from the strong supply/demand fundamentals aided by supply shortages due to a lack of speculative development in recent years, the case for investment in the industrial sector is helped by low obsolescence and the squeeze on land supply from higher land value uses. This is especially the case in London and the south east.”
Research before you invest
Therefore Cluttons’ Commercial Market Outlook report has shown that it may be a good time to invest in the commercial property market, especially the industrial sector. However as Simon Morris recently advised in his free guide to property investing in 2015, investors should do their research before they take out any financial product to ensure they generate healthy returns on their investment.