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Insight & Opinion

Colliers: Economy and investment remain strong as monetary policy stays unchanged

Author: Gemma

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A strong economic situation in the UK is continuing to support the investment and commercial markets throughout the country, the latest market analysis snapshot produced by Colliers has indicated.

The company said that the economy remains on track to beat the predictions for growth approaching 2.5 per cent for the year, with quarter two expansion expected to be ahead of the 0.8 per cent quarter-on-quarter growth seen in the first three months of the year.

Colliers said that with monetary policy tightening still not in place, the economy remains in a fantastic position, with business investment on the up, inflation low and occupier markets starting to strengthen.

In terms of investment, the company intimated that short supply and continued demand continues to create an issue, with the market seeing a wide range of transactions in terms of quality, asset classes and geographical areas.

Transaction levels for investment across the UK are currently at similar levels to those seen in 2013, with more and more funds now looking towards the regions for yields and capital gains, while those in London are now starting to seek out lease events and redevelopment opportunities.

There were sizeable transactions taking place in a number of different assets, including supermarkets, city and regional offices and industrial areas. However, supermarkets saw a slower month in April after a very busy March, which should lead to a quiet end to the quarter for this asset type.

A look at the office market shows that investors are still seeing headline city rents sitting at around the £60 per square foot mark at the moment across most of the UK thanks to steady demand levels, with London seeing most of the rental expansion in part thanks to the squeeze on A-plus stock. This has driven the headline cost in the West End alone to £120 per square foot.

Further north, a strong level demand is causing shortages of office space in some cities, such as Leeds and Manchester, but as of yet Colliers said it is yet to record any real effect on rental prices as a result.

And finally, with regards to the housing market, Colliers said that it is still too early to talk of a housing bubble, despite the fact house prices have been slowly rising again since the start of the year.

The company’s report states that regional prices are still some 5.6 per cent long-term trends, leaving plenty of room for growth moving forward before they hit their peak levels yet again.

It added that the market remains in a very strong position at the moment, thanks to a demand on two fronts, with both the domestic and international buyers very much seeking out places to buy at the moment.

Furthermore, the Help to Buy scheme continues to lend strength to the market, with construction in particular seeing an uptick thanks to this form of government intervention. A higher demand for homes has meant more building taking place over the first two quarters of the year.

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