Boston, MA -- (SBWire) -- 01/29/2014 --The UK's real estate sector has performed well since the property crash and recession took hold, despite experiencing two years of negative economic growth, in 2008 and 2009. Growth has been sluggish in the years since, but a healthy project pipeline and low vacancy rates, particularly in the office and retail segments, has bolstered investment and returns. However, a lack of short-term development in certain areas, such as office space in London, could lead to demand outstripping supply.
Office and retail space have been leading the charge in terms of real estate performance in the UK. London, as usual, posts the highest rental rates, with Old Bond Street continuing to be the most expensive shopping street in Europe. However, a slew of projects, particularly, in the retail segment, have been getting under way in other areas of the country, such as Birmingham, Sheffield and Liverpool, diverting investment away from trophy assets in London and the South East. This is positive news in terms of job creation and funding dispersal. According to CBRE, office leasing activities in UK regional cities outside of London are at their highest for five years.
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Snowballing economic growth (with 1.4% forecast for 2014, increasing to 2.3% in 2017) is driving rental rates. However, there are fears that demand many begin to outstrip supply in certain areas, such as office space in London, with no short-term developments in the pipeline. The only UK city to have more than 200,000 sq ft of speculative space under construction is Manchester. Darren Yates, a partner at Knight Frank says: 'Vacancy rates are trending downwards due to a lack of development, and there is a real shortage of space in some cities.'
Recent Developments
- In December 2013, it was reported that Singaporean sovereign wealth fund GIC has entered into a joint venture (JV) agreement with British Land for a premier office complex in London. GIC will acquire a 50% stake in London's Broadgate estate from Blackstone Real Estate, while the remaining 50% will be retained by British Land. British Land will provide asset management for the JV, while its wholly owned subsidiary Broadgate Estates will offer day to day property management and occupier services.
- In December 2013, it was also reported that Hammerson and Aviva Investors have agreed to sell a shopping centre in Peterborough to US property firm Invesco Real Estate for around GBP202mn (US $329.76mn). The Queensgate Shopping Centre covers an area of 83,300sq m and consists of more than 110 stores and restaurants. The transaction is expected to be completed in early 2014.
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