The UK property sector is displaying signs of resilience despite ongoing economic and political unknowns, according to CBRE’s 2018 Market Outlook report.
The report forecasts continuing economic growth for the UK, despite the uncertainties caused by Brexit. Those uncertainties are likely to peak in 2018, it notes, wth employment growth slowing further, and rental growth patchy in some property sectors, followed by a bounce back.
'The political noise is likely to reach fever pitch during 2018, but don’t be deceived: the UK economy is likely to grow as fast next year as this year, supported by an absence of further rate rises from the Bank of England and a benign global economic environment,' commented Miles Gibson, head of UK Research at CBRE.
'That includes, ironically, solid support from the continued European recovery. While some property sectors will see extremely patchy growth performance, the rise and rise of Industrials & Logistics looks likely to continue, and the ‘beds sectors’ like hotels, built-to-rent and healthcare are also set to grow strongly.'
According to the research, the UK property investment market surprised on the upside in 2017, with a surge in transaction volumes. It is expected that property investment volumes will be roughly the same in 2018 as in 2017, supported by strong overseas interest, and total returns of around 4%.
UK economic growth is forecast as 1.5% in 2018, the same as 2017.
The report says that the weaker UK economy will translate into weaker occupier demand and rental growth in the office sector. However, a stellar performance from industrial and logistics in 2017 is likely to continue into 2018 with rental growth of over 5%.
According to the outlook, retailers and leisure operators will experience a tougher year as consumer spending growth slows, with very little rental growth expected overall.
'Whilst significant risks remain, from reduced consumer spending power, changes to US interest rates and the Brexit denouement, we anticipate robust investment volumes in the property sector in 2018,' concluded Gibson.
