Property predictions 2015 30th December 2014

What is predicted for the property industry in 2015?

Rental growth will become a real factor in most sectors and regions this year, helping to drive returns in place of yield compression.

Allocations for real estate will continue to rise as investors are attracted by a perceived value over bonds and equities but finding assets that meet requirements will become increasingly difficult. UK deal volumes will reach 2014 levels (£60bn) according to Colliers which says UK institutions and international investors will compete for assets, as the ‘search for yield’ and geo-political uncertainty pressures safe-haven markets. Hermes Real Estate chief executive Chris Taylor says: “Since the global financial crisis most real estate markets have re-priced significantly, driven by weight of capital, whilst occupier market recovery has generally been weak. In 2015, finding value will prove more challenging as levels of distress reduce and pricing becomes more stretched in core markets or moves ahead of the fundamentals. “Despite increasingly advanced market cycles, we still see value in segments of the UK and US where economic recovery is more advanced and rental growth has returned. In particular, urban resurgence and growth are driving new opportunities on both sides of the Atlantic. “We will have a continued focus on value added opportunities, income and asset management, whilst seeking to diversify our exposure through debt and residential markets in the UK and other alternative asset types that benefit from structural change and the opportunities presented by sometimes inefficient markets. There will be opportunities in Europe and Asia Pacific, which we will consider on their merit. We will continue to pursue opportunities to recycle capital in the UK in JV arrangements with international capital, which is seeking to secure a strong local partner and a foothold in the market.”

Major changes in the way people want to work and live and government support for these changes will have an increasingly obvious impact on how the property sector will develop moving forward Urbanisation, hot-desking, office to resi conversion, last mile delivery distribution hubs, ecommerce. The industry knows these trends are here to stay and are having far-reaching impacts. This year we will see ever more work go into future proofing against these profound changes and there will be some genuinely surprising success stories and failures along the way.

A likely weak coalition government after the General Election will harm business confidence and could well lead to corporate occupiers remaining wary of major moves. A weak government could prompt a snap second General Election in the second half of next year.

Business rates will continue to be the most frustrating issue affecting property. A lack of significant movement over the last year means that as the Purdah kicks in around General Election the year is unlikely to see evidence of the genuine reformation industry wants.

The great Northern and Scottish cities will fight an increasingly vocal and confident battle post the Scottish referendum as they seek more powers and funding to regenerate and to repair the imbalance between London and the South East and the rest of the United Kingdom.

Property companies – including the agency community – will continue to look to bulk up and improve their global reach via key hires and mergers and acquisitions. The emphasis remains on size and an ever widened client offer.