Property market will ‘get worse before it gets better’, experts claim
THE PROPERTY market has not reached its lowest point and is set for further problems as the economy continues to struggle, a Yorkshire audience was told.
Andrew Marston, Atisreal’s associate director of research, forecasts that, having gone through the property re-pricing and a second dip from the credit crunch, the property market is moving into a further decline.
Furthermore, Mr Marston predicted that the economy will perform below trend growth until 2011, which means household expenditure will slow further, hitting the retail and logistics sector. Employment in the financial and business services are also expected to fall a further 1.8% this year and another 1.2% in 2009, he said.
For the investment market, this means that yields will have to move out to reflect where the economy is going, Mr Marston told the audience at Atisreal’s latest regional economic forecast seminar in Sheffield.
Mr Marston also claimed that the office sector would not see rental growth until 2012, with Yorkshire seeing office rents slide by 0.6% by the end of 2008, and further to 2.5% and 1.9% in 2009 and 2010 respectively.
Retail rents are expected to begin to decline in 2009 when shoppers are likely to have felt the pinch of the credit crunch more, with a predicted 3.4% fall in rental levels.
Shopping Centres, such as Meadowhall will see a gradual fall in rental growth this year of 0.7% which will continue to fall in 2009, Mr Marston said. He also claimed that rents for retail warehousing were expected to fall 5.7% this year and a further 9.7% in 2009.
Andrew Halstead, head of Atisreal’s Sheffield office, said the industrial market was holding steady.
Mr Halstead said: “The industrial market is currently the least affected by the present economic conditions. Sheffield has an established industrial base with high-tech businesses well placed to compete in global markets and the current value of the pound is assisting these companies to secure new work from the developing economies.”
Nick Brearley, of the Sheffield investment agency at Atisreal, said: “The investment market is still falling rapidly and buyers are waiting for the market to ‘bottom out’ before they start to undertake transactions again. Once this happens the volume of deals will rise which will regenerate the local market.
“However there are still investors who are active in the region and although the number of deals undertaken by institutions has been small in the last year we have seen a number of private individual investors emerge; there are also a number of ‘opportunity funds’ that have been set up to capitalise on the current situation.
“The impact of the current downturn hasn’t been as pronounced for Sheffield as for other areas in the region as the market has remained relatively constant over the last few years. There is still occupier demand within the city and Sheffield hasn’t to date experienced a massive oversupply; although there is an estimated 800,000 sq ft of committed Grade A office space coming on to the market in the next two years this is necessary to continue the city’s regeneration plans by promoting inward investment and ensuring that the region continues to go forward.”
