Page 6 - KPRM 2019

Caxtons’ Property Market Analysis
Components of All Property IPF total return forecast for UK Commercial Property
Annualised average over period 2019-2023
Rental growth
0.5%
Capital return
-0.8%
Total return
4.0%
Source: Investment Property Forum Survey of Independent Forecasts for UK Commercial Property, August 2018. Forecasts derived from 24 leading fund/investment management houses and consultancies.
Caxtons’ Property Market Outlook
While the UK economy has succeeded in withstanding a significant level of Brexit related uncertainty over recent years, recent intensification is taking its toll on activity. The Bank of England’s average of independent forecasts indicates GDP growth of 1.3% for 2019, well below the long term trend, with a more subdued 1.2% expansion in 2020. This said, all forecasts are currently accompanied by a plethora of scenarios and caveats given the current unique circumstances.
Business investment has proved a casualty of this uncertainty, compounded by a downturn in inward investment into the UK. Of course, the direction of Brexit travel may be clearer by the time of the publication of this report, but domestic issues are not the only concerns for the UK economy. The global outlook is also less positive with the emergence of trade barriers in the US slowing growth in China and weak Eurozone growth.
Discovery Park, Sandwich.
0.9%
UK All Property annualised total return forecast 2019
Source: Investment Property Forum Survey of Independent Forecasts for UK Commercial Property, August 2019
On the domestic front, consumer spending has remained relatively resilient despite the uncertainty. Record levels of employment have contributed to this outcome, although with real incomes continuing to exhibit slow growth, the potential for an expansion in spending currently remains relatively mute even with a Brexit settlement.
Kent’s business park sector is looking ahead of the current turmoil. Established parks such as Kings Hill have seen robust lettings activity, while the county’s science and technology offering is developing rapidly with growth plans at Kent Science Park, Discovery Park and Kent Medical Campus.
The rapid expansion of technology and life sciences over the coming years will present tremendous opportunity. But success will depend on attracting top talent as well
as businesses across the spectrum, from start-ups to the established. This year’s addition of further innovation space to the county’s existing supply will support this ambition.
Nationally, office market total returns have slipped over the last year due to outward shifts in yields, despite occupier activity remaining relatively buoyant. Kent has seen values remain stable, with robust demand and supply shortages driving rental growth, underpinning values. The county’s towns with a critical mass of stock have seen greater activity, including increased representation of knowledge-based industries. Strategies to boost creative industries as part of the Thames Estuary Production Corridor will further support high value jobs growth.
The delivery of new housing will be crucial to support these ambitions. While Kent remains relatively affordable on a south east basis, this value is increasingly being recognised, driving demand, particularly in the county’s commuter towns. The new settlements coming forward over the coming decades are being supplemented in the short term by a supply of exciting
McArthurGlen Designer Outlet, Ashford.
Kent prime yields
Industrial Multi-let 10
9.0 8.0 7.0 6.0 5.0
Industrial Distribution
Offices
Business Parks
Source: Caxtons
04 Kent Property Market Report 2019
PHOTO: MCARTHURGLEN DESIGNER OUTLET
PHOTO: DISCOVERY PARK
H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 H1 2019
% Yield