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Insight & Opinion

Will the UK Commercial Property End the Year on a High?

Author: Gemma

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The October 2015 UK Commercial Market in Minutes report from Savills has shown that in September the average prime yield remained from the sector at 4.65% for the second month in a row.

Experts from Savills forecast that 2015 will be another record breaking year for the UK’s commercial property market.

“By the end of the third quarter deal volumes have exceeded £50bn and should Q4 deal volumes reach the same levels as 2013 and 2014 then total investment volumes will top £70bn for the first time,” the report stated.

UK real estate top choice for investors

Savills highlights research conducted by the Lloyds Bank Private Banking Investor Sentiment Index, which has illustrated that the attention of investors’ has shifted towards the UK’s property market.

Sentiment towards the asset class stands at 53%, much greater than UK equities which is the next highest at 24%.

Will political interventions effect regional markets?

Proposals of the Housing Bill announced in October included making a temporary rule which was introduced in May 2013, into a permanent one. The ruling would mean that disused offices could be converted into homes without planning permission. Under the temporary changes, 4,000 conversions were given the go ahead.

The new ruling will also allow the demolition of light industrial property to residential in a bid to bridge the gap between housing supply and demand across the UK.

The report highlights that changes to legislation could have an effect on occupancy rates.

“This could in turn have a dramatic impact on rental growth and vacancy rates in both the secondary regional office and industrial markets as already constrained supply is removed from the market and occupiers compete for less better quality buildings…” the report said.

As 2015 comes to an end, Savills expects sentiment towards the UK commercial property market to remain strong, with the possibility of investment in the sector ending on a record high for the year.

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