Experts have reacted to macroeconomic concerns in the UK after British Chancellor of the Exchequer, Rishi Sunak, told Members of Parliament the Ukraine war has made things more uncertain, and will further push up costs.
Among those reacting to the Chancellor’s update was Stephen Wolfe, head of commercial at BNP Paribas Real Estate.
He said: ‘With inflation already at a 30-year high and predicted to increase again to 7.4% this year, today’s Spring Statement was largely focused on addressing rising costs for households and businesses.’
‘Elevated inflation will remain a key headwind for the UK’s real estate market this year. The development market is already navigating inflationary pressures with construction costs growing, and this will inevitably impact commercial rent levels, as developers grapple with the feasibility on new schemes. This comes at a time when costs have already become elevated as the industry embraces carbon reduction.’
However, he added the overall outlook for the market remained positive.
‘The UK is now seen in many ways as offering better value than continental Europe, for example in Berlin and Paris prime yields are below 3%. The UK also offers investors a very deep market for all asset classes.'
Investment volumes in January surpassed £4bn (€4.8bn) for the first time in four years and we expect levels to reach at least £66bn this year, maintaining the recovery which came through in 2021. Said Wolfe: ‘Most activity so far this year has centred around retail and offices – a very welcome sign of improved confidence in the recovery in the use of workplaces and high streets.’
Earlier on Wednesday, Knight Frank said London offices had seen a 300% increase in transaction volume compared to Q1 2021.
