Commentary. The property market overview ESSEX & LONDON FEBRUARY

Transcription

1 Commentary The property market overview ESSEX & LONDON FEBRUARY 216

2 Commentary The property market overview Commentary provides an overview of economic factors affecting the property market, together with our observations on the commercial property sector in Essex and London over the last six months. P R E PA R E D B Y C H R I S T I D D E R M R I C S Contents 3. Economic Activity 4. Monetary Policy 5. House prices and RICS data 6. Our observation 7. Done Deals 2

3 Economic Activity Opinion is split amongst commentators as to whether 216 will be better for the UK than 215 in terms of economic growth. The global economy has experienced a very shaky early start to 216. Trading sanctions on Iran were lifted, causing Middle East stock markets to plummet with fears that a fresh wave of oil will have the effect of increasing supply to a market that is already saturated. This, combined with more poor trading news from China, caused the FTSE to shed 113bn in its first ten days of trading, signalling its worst start to a year in history. Stock market aside, we anticipate the next six months will comprise steady market conditions with moderate growth, and Small and Medium Sized Enterprises (SME's) continuing to invest in their businesses on the back of good recent performances and positive outlook. The January 216 release of the Chartered Institute of Procurement and Supply (CIPS) Purchasing Managers Index (PMI), showed a disappointing slowdown of the manufacturing sector in December from its recent peak in October 215. Performance as a whole was below that seen in 214, despite lower global commodity prices, especially oil. The CIPS (PMI) for Construction ended the year well at 57.8 (5. and above indicate growth). Construction companies report a positive outlook for business conditions in 216 and advise that end of year activity was boosted by commercial construction rising at its fastest pace since October 214. The CIPS (PMI) Index for Services ended the year at 55.5, indicating decent overall growth. Business growth was supported by a strong increase in new business in December, as firms reported successful marketing campaigns, although the rate of job creation is said to have slowed. 2.5% % 216.3% Q1.7% Q2.5% Q3?% Q4 International Monetary Fund UK GDP Growth 215 Gross Domestic Product (GDP) Growth Forecasts 3

4 Monetary Policy The Bank of England advised in its most recent Credit Condition Survey of Lenders, that for Quarters 3 and 4 (215), the availability of credit to the corporate sector remained unchanged. The rate of employment in the UK continues to reduce and sits at 1,68,, with 239, more people having found jobs as at November 215, compared with the same time last year. New data due out at the end of February is likely to show a further improvement to the situation. Fuel prices continue to drop, contributing to a reduction in inflation; pump prices went below 1. per litre in December 215 for the first time since 28. The Retail Price Index (RPI) and Consumer Price Index (CPI) both rose in the year to December 215, but only by small amounts and landlords of investments with rent review clauses geared to RPI are likely to have been in a better position, had clauses been geared to Market Rent. Timber costs to the construction industry fluctuated over the last year, with coniferous timber increasing in price per m³ by 2% and softwood reducing heavily by 12.3%. On a lighter note, the cost of Christmas dinner reduced by 1.3% compared to last year, reportedly on the back of a sharp reduction in supermarket pricing of turkeys, mince pies and Christmas puddings. 1.92m 1.68m Nov 14 Nov p Dec 14 99p Dec 15 Up 2% Down 12% Coniferous Softwood Unemployment Level Petrol Prices Timber costs pm 3 Over last year to September Cost of Christmas dinner for 8 (not including drink) 4

5 House Prices and RICS data House prices continue to rise in the UK, with Nationwide and Halifax recording 4.5% and 9.% growth to November 215, in their respective House Price Index s. A number of factors encouraged growth in value, including short supply, high demand, economic growth, rise in earnings, increased job security and low mortgage rates. First time buyers continue to find it almost impossible to buy in London and are renting until a later age than recent previous generations have had to. Six of the graphs below have been taken from the RICS UK Commercial Property Market Survey Q The RICS reports that in the owner occupier market, demand for leasable space continued to rise across all sectors, as it has done in each quarter since the early part of 213. The survey goes on to advise that its members report momentum is greatest in the industrial sector at present, although tenant demand growth remains solid in both the office and retail areas of the market. Against the increase in demand and reduction in supply, the value of incentive packages on offer from landlords to tenants also fell across each sector; an ongoing theme for much of the past two years. 5 % 1% 197, 25, % 3 % 4.5% 9 % 8 % 9 % 196, 195, , 2, 22,5 24, Nationwide Halifax Nationwide Halifax HOUSE PRICE INDEX Growth (Annual change) Dec 15 Release HOUSE PRICE INDEX Average price Dec 15 Release OCCUPIER DEMAND d t AVAILABILITY RENT EXPECTATIONS INDUCEMENTS INVESTMENT ENQUIRIES CAPITAL VALUE EXPECTATIONS 5

6 Our Observations We have carried out a review of deals done by our Agency Team and set out data accordingly. All sectors other than land were subject to a far higher proportion of property being let rather than sold. Most landlords are still choosing to hold property as an investment; not considering sales. This is largely because rents are presently high (and continue to rise), interest rates for savings in the bank are low, mortgage rates are low (encouraging borrowing), Capital Values have risen (and continue to) and the appeal of potential redevelopment under Permitted Development Rights (PDR). Half of leases agreed were subject to some form of incentive, whilst 13% of leases were made more appealing to tenants by the offer of a rent free period and tenant option to break. Despite this, we consider the market to be strong and incentives being offered during the second half of 215 were less generous than for the same period the year before. 33% SALES 67% LETTINGS INDUSTRIAL DEALS 11% SALES Number of lettings subject to rent free period 89% LETTINGS 4% 3% 2% 1% % SALES 24% 1% LETTINGS 2% 15 % 1% 8% SALES 13 % 2% LETTINGS OFFICE DEALS RETAIL DEALS LAND DEALS Number of lettings subject to Tenant option to break INCENTIVES Number of lettings subject to both rent free and option to break 6

7 LET CHELMSFORD WITHAM UNDER OFFER CHADWELL HEATH BARKING Logistics Warehouse 3.6 acres of Development Land Industrial/Warehouse Industrial/Warehouse 64,658 sq ft + secure yard plus 1, sq ft unit 27,32 sq ft 67,141 sq ft Dukes Park Industrial Estate Eastways Estate Freshwater Road Thames Road RAINHAM HARLOW SOUTHEND CANVEY ISLAND Roadside premises with development potential. Site of.41 acres New Rd 2.1 acre Development Site (1+ flats consented) Burnt Mills Road Development Land acres Priory Crescent Industrial/Warehouse 27,544 sq ft On 2 acre site Charfleets Ind Estate Done deals Above are a selection of deals that we concluded in 215. To see how we could assist with your property matters in 216 please contact us

8 VALUATIONS I COMMERCIAL AGENCY I INVESTMENT I LANDLORD & TENANT PROPERTY MANAGEMENT I RESIDENTIAL LAND I RESIDENTIAL AGENCY Head of Professional Steve Metcalfe steve.metcalfe@kemsley.com Head of Agency Colin Herman colin.herman@kemsley.com Head of Property Management Tom Kinloch tom.kinloch@kemsley.com BASILDON The Capricorn Centre, Cranes Farm Road, Basildon, Essex SS14 3JA Tel: Fax: basildon@kemsley.com CHELMSFORD 113 New London Road, Chelmsford, Essex CM2 QT Tel: Fax: chelmsford@kemsley.com LONDON 46 New Broad St, London, EC2M 1JH Tel: Fax: london@kemsley.com ROMFORD Midland House, , Victoria Road, Romford RM1 2LX Tel: Fax: romford@kemsley.com This document has been prepared by Kemsley LLP as a guide to the economy and property market in the South East. It is not intended to act as an investment guide. The content is believed to be reliable, but Kemsley LLP accepts no liability for errors or omissions. Recipients should not act independently on this content. The views, forecasts, and estimates are those of Kemsley LLP and should not be reproduced without written approval.