Boston, MA -- (SBWIRE) -- 01/09/2013 -- This United Kingdom Real Estate report examines the commercial office, retail, industrial and construction segments. With a focus on the principal cities of London, Manchester and Glasgow, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of a variety of factors weighing heavily on the UK's real estate market.

The commercial sector is under pressure as a result of the country's economic woes, though it has been more stable than might be expected. Activity in commercial property has been very slow as businesses and landlords watch and wait for signs of economic recovery. The office space sub-sector is a stable element of the segment, with office space in central London experiencing a healthy run of growth. This now looks to be slowing, but we expect growth to remain positive, as the capital has limited scope for new development and demand has moved faster than new supply. New retail developments (larger shopping malls) and fierce competition for high-end retail space in central London are the key growth areas, with other retail spaces as well as industrial and office spaces showing slower growth rates in the face of broader economic weakness in the UK.

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High-end retail in the London market is the clear outperformer in the UK real estate sector as a constant flow of foreign shoppers and tourists support this segment despite weak macroeconomic fundamentals. Outside central London, large shopping centres continue to open across the UK, creating new supply and attracting tenants and footfall, although 'high street' retail will suffer as a result. The office and industrial segments, however, will remain under pressure, despite some high-profile deal making, as a result of weak economic growth, tight credit and job losses in the private and public sectors undercutting demand for new business rental space.

Key Points

- The shock 0.7% contraction in UK real GDP in the second quarter caught most observers off guard. The subsequent revision to -0.5% did little to assuage fears that the economy is sinking. However, we still hold that the economy is treading water rather than heading into a deep and protracted recession, with the latest downturn being more of a soft patch within a longer cycle of stagnant and uneven growth.

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