Renewed investor confidence – Savills
Investor optimism is improving, says Savills: the risk aversion that had started to creep in has now disappeared and pointing to renewed confidence in the sustainability of current pricing levels. The lack of prime property available at attractive pricing is, however, leading some investors to seek value beyond the key prime locations and increasingly in regional markets.
UK funds are already looking for opportunities in the regions, Savills says, in order to realise greater returns, while overseas investors are also becoming increasingly acquisitive – although the weight of this money is targeted at prime, well-let assets in key regional cities, it notes.
“This quarter’s GDP will play a key role in determining whether this optimism holds. If it does, we may see an increasing number of investors move up the risk curve looking for enhanced returns,” Savills adds.
The renewed confidence is also having an impact on development activity, the firm says, with Savills’ commercial development activity three-month outlook rising to a net balance of +9.2% in January, the strongest registered reading since April 2010. This is being driven in particular by improved confidence in the markets for industrial property, warehouse space and retail premises, it points out. The three-month outlook for industrial/warehouse development was up 15.6% after a very strong 19.8% in December, Savills says, bringing it into line with the confidence levels seen at the peak of the market in early 2007. Confidence in retail development was also higher, at +9.2% after +4.4% the previous month.
Stronger tenant demand in a number of markets, combined with a non-existent pipeline, is underpinning confidence in starting new projects – in addition to the improving news flow surrounding the UK economy, the firm adds.
