Short-term outlook remains clouded, says Colliers International
Colliers International thinks that the current conditions in the UK commercial property market will continue for the rest of this year and into 2012. Reporting its interim results to the London Stock Exchange today, the firm said it expected London occupier markets to remain firm, but noted that rental growth would be driven by a lack of supply rather than strong demand.
Political and economic uncertainty would continue to discourage expansionary investment and corporate consolidations, Colliers International said, despite the considerable cash reserves held by many companies. Regional markets would continue to see a slow recovery as a result, the firm added. “The risk of further regional rental declines is limited as rents may be reaching base levels, but we do not expect significant rental growth in regional markets to materialise until 2013,” it said.
The property investment market is also likely to remain flat, Colliers International says, with transactions in 2011 and 2012 expected to struggle to reach 2010 levels. The firm noted that transaction volumes by value were 25% lower in Q2 this year than in Q2 2010 and added that “the annual year-end surge” might not materialise this year.
It does however expect capital values to remain stable, thanks to the international and domestic investment funds seeking a home in prime assets – this should offset the weak economic outlook and the limited attractions of non-prime properties.
“Few truly prime assets are expected on the market but banks, having had time to write down assets to realistic levels, are now more likely to sell good quality secondary assets,” it notes. Tertiary assets are unlikely to attract much interest, the firm says: “Debt is generally not available, tenants are vulnerable, and alternate uses are uncertain.” Colliers International concludes that, unless there is a major change in investor outlook or strategy, the total value of UK property investment transactions in 2011 will be lower than in 2010.
Colliers International today reported an operating loss of £3.47m for the six months to 30 June, compared with a restated loss of £3.05m for the first half of 2010. Group revenues rose 2% year-on-year to £31.02m. Operating expenses increased by 4% as the company continued its recruitment programme – it has recently appointed a new head of retail, a head of shopping centre leasing, a head of South East offices and two new directors on the Central London team. It expects to break even for the second half of this year. Although he said the short-term outlook remained “clouded”, chairman Sir John Ritblat remained confident about the firm’s medium and longer-term prospects.
