Colliers International issues 2013 forecasts

Colliers International expects the tentative economic recovery to stumble in the first half of this year, and has cut its forecast for total returns in 2013 at the All Property level to 6.7% from 8.8%. While higher employment levels and improved disposal income growth compared with this time last year should put the economy in a better position at the start of this year, says Mark Charlton, head of research and forecasting at Colliers International, increased energy tariffs and continued eurozone uncertainty, in particular given the upcoming German elections, could affect business confidence early in 2013.

Colliers International’s latest Real Estate Investment Forecast notes that last year was particularly tough for the retail sector, which saw a number of companies go into administration. But the firm thinks 2013 should be “slightly better” thanks to economic growth and falling inflation, “although there are still headwinds to be faced by the retail sector” such as online and mobile shopping, high vacancy rates and delayed business rates revaluation. As a result, it has lowered its 2013 forecast for the retail sector to a total return of 5.9% for the year. Rental values are now expected to contract by 1.2%.

After a strong year for the offices sector in 2012, Colliers International predicts more of the same this year, with continued strong investment activity, particularly from overseas. The firm predicts total returns for offices of 7.7%, outperforming the retail and industrial sectors as a result. It has downgraded its forecast for rental value growth for Central London offices to 3%-4% from 4%-5%, and for offices outside the capital it expects continued contraction in rental values.

There was a jump in investment in industrial and logistics property in late 2012, but Colliers International says the outlook for 2013 is not quite as positive, as investors maintain a risk-averse stance on the sector and good-quality product is in short supply. “Until risk aversion recedes, only portfolios and high-quality estates will continue to attract bids in 2013,” the firm notes. It is forecasting a return of around 7.5% on the sector this year and says that rents, which remained static in 2012, are likely to stay flat in 2013.