Thursday 23 November 2017

BNP Paribas bullish on UK commercial real estate

Strong rental growth is predicted to return in all sectors by 2016, according to forecasts from BNP Paribas Real Estate, with 2015 forecasted as the best year for total returns for both retail and offices, returning just under 12%.

BNP Paribas bullish on UK commercial real estate

Around £6 billion has been invested by foreigners in London so far in 2013, more than £1 billion from the Far East alone

November 25, 2013

According to BNP, Central London as a whole has accounted for around 47% of total UK investment so far this year, at approximately £12 billion.

Foreign demand has continued to bolster transaction volumes, with 50% of Central London investment coming from abroad, and nearly one-fifth from Far Eastern investors alone.

Regions outside London are also seeing an increase in investment with a total of £14 billion invested so far, with a third of that sourced from overseas. North American investors who continue to be among the heaviest foreign investors into the regions, although Middle Eastern money has also increased and now outstrips investment from Europe.

During its autumn Capitalise event for investors, BNP Paribas Real Estate’s head of research, Claire Higgins, said: “London will still finish ahead of the pack this year in terms of performance, with central London retail, West End offices and City offices expected to be the winners in terms of total returns with 13%, 10% and 8.7% respectively. We also anticipate other markets picking up by the end of this year, with logistics returning over 9%, just ahead of supermarkets.

"Industrial across the country is set to pull ahead of regional office and retail markets, with national standard industrials returning 7.3%. We are forecasting a total return to all property of 6.6% in 2013.”

“Across the coming five years to 2017, we expect the national recovery to drive other markets to catch up to London. We are forecasting that south-east offices will also provide strong returns, closely followed by logistics and shopping centres, rather than Central London alone,” Higgins added.

London office prime rents have already recovered substantially and by 2015, BNP expects them to have recovered to pre-recessionary highs (West End £120 per sq ft and City £62.50 per sq ft). For average net effective rents, the leading adviser predicts even stronger growth, with the early 2008 peak expected to be surpassed by the end of 2014 and further growth anticipated during 2015.

On the wider economy, BNP Paribas’ David Tinsley reported that the UK’s economic position looks better, with momentum not set to fade in the short term. Although the UK has had better growth than other countries, the level of output is still below its pre-recession peak and it is still behind Germany, US and even France.

BNP Paribas Real Estate’s UK CEO, John Slade stated: “the lack of occupational supply will lead to pricing and rental growth, and because of London’s continuing strength, we will see even further investment into the regions as well.”

John Slade was appointed CEO of BNP Paribas Real Estate in 2012

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