The phrases ‘risk curves’ and ‘quality secondary’ are increasingly heard in informal conversation suggesting that movement may be imminent, it says. However, there is little debt to support such a move, despite promising trends in the Bank of England’s latest credit survey.
As far as investment is concerned transactions are limited, but receiver stock is on the market with many deals linked to redevelopment and asset/tenant management opportunities. Yields are stable, although secondary is expected to weaken of the course of the second half of 2011.
In the retail sector, retailers continue to face difficult trading and tight margins as consumers look for value. Costs are undermining profits and operators are looking at new formats and services.
The West End is seeing rental growth in all submarkets due to lack of Grade-A space. The City is less pressured but region leasing is sluggish with vacancies stable, but high, it also says.
In Industrial sector indicators are positive, but demand is patchy except for supermarkets and internet sales distributors who are absorbing the remaining large Grade-A large floor plates.
House price stability remains very sensitive to interest rates, mortgage availability and wage growth. Price declines are expected in 2011, although London continues to attract investors, the report adds.
‘The Bank of England Credit Conditions Survey shows improvement in debt availability for real estate in the second quarter of 2011. Further improvement is expected in the third quarter, although demand for finance is expected to be weak,’ said Walter Boettcher, director of research and forecasting at Colliers International.
‘The cost and availability of wholesale funds may be a constraint. Investment has not regained momentum after the Easter break. Year to date, volumes are similar to 2010 by value, but the second quarter of 2011 is down by 40% against the second quarter of 2010. Few prime assets are available, but secondary asset offerings are gathering pace,’ he explained.
‘Supermarkets and food processors are looking for space, as well as internet firms consolidating and centralising distribution. Amazon took 700,000 square feet from Gazeley in Rugeley, leaving few Grade-A alternatives in the Midlands. Design and builds are dormant, although land banks are growing. London and the M25 continue to look bubble like as steady demand outstrips supply,’ he added.
The Central London residential market remains resilient he also said. ‘Sales to overseas private investors is strong. The London rental market is also very strong and the FT reports that London & Stamford plans to invest in private rental accommodation in London by providing finance to cash strapped developers,’ he concluded.
