For the data behind the commentary, download our latest UK Investment Report.
Mixed sentiment abound
There is a mix of sentiment as we move into the final quarter of the year. Notably, the recent divergence between the UK NAREIT index and the FTSE100 is in stark contrast to where we were earlier on in the year, suggesting that equity investors are much less bullish on real estate than they are on other parts of the economy as a result of the higher interest rate environment – with offices and industrial focused shares down even further.
In terms of investment volumes, we are not envisaging a sharp increase in activity during the final few months of the year – due in part to the spectre of seeing how the Chancellor is able to balance the books in the late budget. We cover that more in the Economy and Housing Marketbeat. However, there are a number of areas to keep an eye on:
Across central London offices, while volumes remain muted, there is increased demand particularly from US private equity investors and Japanese investors, particularly on the look out for perceived value in the market. Overall, the market remains relatively muted but feels healthier than it did this time last year.
The retail sector’s stellar performance continues but investor demand is uneven across the sector. An improvement in lending conditions is helping fuel demand particularly for shopping centres, and there are a number of larger opportunities online which will be a barometer for market appetite.
Value-add capital remains active across the PBSA market, particularly for older stock needing capex or operational resets. The volume under offer will likely result in the market falling slightly below last year’s total investment, but there have been several portfolio launches in recent weeks.
While hotels investment is well below last year’s total, several large assets and portfolios are now in the market or under offer, with activity ramping up – particularly for larger lot sizes in London. Despite the volumes, the shift towards single-asset deals means the overall market is more liquid than last year.
For more information, including on the interest rate decision see our Economy and Housing Marketbeat.
