Bull and Bear review the case for office investment in the UK's most dynamic regional cities.
They are encouraged by the strong rental growth for Grade A office space.
They caution, however, against a 'catch-all' approach to regional office investment.
With a clear divergence between prime and average rental growth performance, it is clear that investors will need to be selective.
Enjoy your Sunday.
Bull and Bear meet up to discuss the London office market and explore whether it should be on investors’ buy-lists.
The Central London office leasing market in 2022 was broadly in line with the ten-year average, despite a subdued end to the year.
Prime office rents across all the UK’s key cities are now growing again. The very low availability of prime space, coupled with the appeal of high-quality buildings located in the most sought-after areas, is driving rental values up.
Bull and Bear don’t foresee a stampede for London assets over the next few months. With plenty of capital sat on the sidelines ready to be deployed, the revised pricing should offer significant opportunity for buyers later in 2023.
Enjoy your Sunday.
Bull and Bear venture 'off piste' to review the vertigo-inducing property prices in some of the world's best ski resorts.
They discuss the challenges posed by climate change, the need for a year-round resort offering, and the new breed of executive sNOwMAD driving demand for mountain living.
They conclude that investment in ski destinations that show resilience to climate change and offer dual-seasonality appeal remains a safe bet.
Enjoy your Sunday.
Bull and Bear are having a taxing time.
They use their Weekly get-together to analyse how the Government spends our money and from where the tax originates.
Whilst Income Tax, Capital Gains Tax, National Insurance, Corporate taxes and VAT are the ‘big-hitters’ at the national level, Council Tax and Business Rates provide the life-blood for local authorities.
The revaluation of rateable values comes into effect in seven weeks’ time. Yet, for many other pubs and retail outlets, it cannot come soon enough.
Enjoy your Sunday.
Bull and Bear revisit the state of the UK housing market in light of the latest interest rise on Thursday.
According to Nationwide, house prices in the UK have now fallen for a fifth month in a row, with the average cost of a home some 3.2% below the peak seen last August. This fall, however, is only reversing some of the exceptional property price expansion that has occurred since the onset of the pandemic.
Last week, the Bank of England announced the average mortgage rate for new loans (3.67%) rose in December to its highest level in a decade. Furthermore, mortgage approvals fell to their lowest level since January 2009, excluding at the height of the COVID pandemic.
Significant house price falls are being forecast for 2023. Over 10% in some places. But it is a different, much more positive story for the rental market.
Enjoy your Sunday.
Bull & Bear examine the changing nature of global supply chains in the face of increasing costs and disruption.
They conclude that supply chains will need to be re-configured to provide the necessary resilience, prompting an onshoring and near-shoring of operations.
These changes will have major impacts for the warehouse and the logistics sector in the UK. And Bull, as ever, is keen to capitalise!
Enjoy your Sunday.
This is the third edition of Bull and Bear this year. How time flies! In the first two issues, our friendly protagonists considered the likely impact of the stuttering economy and the sharp rise in yields on the outlook for property performance in 2023.
This week, Bear is in bed suffering from concussion and a broken ankle. Bull tries to be sympathetic, but he cannot stop himself going off on a personal rant about the volume of people still working from home (WFH).
His opinions may possibly reflect his age, but Bull argues that WFH is damaging the economy, destroying the benefits of team-working, impacting on personal welfare and putting massive pressure on shops and restaurants which depend on five-day trading.
Bull is also concerned about the lack of regulation on the space/environment that staff may have to deal with when working from home.
Bull concludes that after having to cope with the challenges of Brexit, the pandemic and more recently, the rising cost of living, the UK has fallen into a national state of lethargy. Somewhat impetuously, he proposes that we should ‘up and the coffee smell wake’ or something very similar!
Despite the positive, if not somewhat surprising economic results this week, CBRE's Monthly Index Result's Call on Wednesday provided yet more sobering news on the state of the UK property market.
The headline capital value loss figure for 2022 for All Property was -13.3%, with some sectors (and sub-sectors) faring far worse. Industrial capital value loss for 2022 was -21.0%, Offices recorded -12.1%, with Retail recording -8.1%, making it the best performing sector of the 'traditional three'.
The Index also shows a -14.6% capital value fall since the beginning of October, with -3.0% in December alone. However, there are some suggestions that property valuations will reach their lowest point in the first quarter of this year, before starting to rise again.
Transactional activity is, however, unlikely to improve meaningfully until the fall in values has run its course and vendors accept that purchasers will only be prepared to buy if the pricing reflects the new reality of higher interest rates.
If pricing settles and rental value growth continues, property total returns are expected to be higher this year than in 2022.
Enjoy your Sunday.
Bull & Bear sift through a pile of Investment Outlook reports in the hope of finding a consensus opinion on the direction of the UK economy.
Whilst there are clearly economic headwinds and heightened geopolitical risks, they are reassured that there are now convincing signs that inflation is starting to moderate and the upcoming recession is likely to be modest.
Whilst 2023 may be a tough year for the UK economy as a whole, it could be an opportune time for savvy investors to secure UK real estate at much reduced prices.
Enjoy your Sunday.
Despite another mark-down in capital values this month, Bull and Bear are confident that 2023 will be a good year for dollar-denominated overseas investors who have ambitions to buy into the UK market.
They are particularly heartened by the Economist’s Big Mac Index which suggests that the fall in the pound’s exchange rate may have been overdone.
They also reflect on how quickly the UK is inclined to mark-to-market capital valuations … way ahead of other countries, which invariably leads to a swifter and more pronounced bounce-back.
Enjoy your Sunday, even if you may be watching the rest of the FIFA World Cup through rather less enthusiastic eyes.
Whilst there has been a general improvement reported across the UK hotel sector, London hotel performance is still yet to return to pre-COVID levels.
According to PwC’s UK Hotels Forecast 2022-2023, the outlook for London and the UK regions are very different.
Surging inflation, crippling high energy costs and rising interest rates are major challenges for hoteliers at present, not to mention staffing shortages and supply chain disruption.
The budget end of the hotel market is notoriously the most resilient, with budget brands like Travelodge and Premier Inn historically performing strongest in tough economic times.
Current market conditions are impacting transactional volumes, yields have drifted out, but interesting investment opportunities will arise.
Enjoy your Sunday.
After the Supreme Court ruled that Westminster's consent is required before the Scottish Government can hold another Scottish independence referendum, Bull & Bear revisit the case for property investment in Edinburgh.
With the Scottish capital riding high at the top of the St Bride's UK Cities Index, their verdict is unanimous.
Enjoy your Sunday.
In light of the world's eight billionth resident being born earlier this week, Bull and Bear meet up to discuss population growth.
The world's population is now three times larger than it was back in 1950 and it is forecast to reach 8.5 billion by 2030, 9.7 billion by 2050 and 10.4 billion by 2100.
There are eight countries that will account for more than half the population growth until 2050, with India overtaking China next year to become the world’s most populous country.
London’s resident population grew by 7.7% between 2011-2021 to stand at 8.8 million. This population growth has, however, not been uniform. Rather, it has been much more prevalent to the east and west of the capital.
London has retained its' credentials as the world’s most desirable city for people, businesses and investors, meaning even more people will want to come and live there.
Enjoy your Sunday.
Over their usual Sunday drink at the St Bride’s Tavern, Bull and Bear view the Good, the Bad and the Ugly features of the current UK property market.
The MSCI/IPF Q3 and the CBRE October Monthly Performance numbers, which were published during the week, combined to make uncomfortable reading.
However, the recent hike in property yields and lower gilt yields has repaired some of the spread which will be required to attract buyers back into UK property.
Meanwhile, property funds are now being targeted for redemptions to help our domestic db pension funds realign their portfolio weightings following the LDI debacle last month.
Notwithstanding these headwinds, and the expectation of an unpalatable Autumn Statement on Thursday, Bull sees the opportunity to pick up ‘cheap’ deals.
Enjoy your Sunday.
