Investment News

New investor demand in UK commercial property market rebounds post Brexit

by International Commercial Investment on January 28, 2017

Source: Property Wire

Despite some concern surrounding potential relocation of companies based in the UK due to Brexit, demand from overseas buyers in the commercial property sector was up notably across all areas of the market in the fourth quarter of 2016.

Demand increased for a second straight quarter with the growth in enquiries gaining momentum but expectations for rental and capital growth moved back into negative territory in central London, according to the latest report from the Royal Institution of Chartered Surveyors (RICS).

Some 21% more respondents saw a rise in demand in the final quarter of the year, up from 9% more in the previous quarter and foreign investment also saw a rebound, with the weaker exchange rate likely to have been an important factor.

The survey also shows that 20% more respondents saw a rise in demand in foreign investment enquiries up from 7% more quarter on quarter and a significant difference from the -27% recorded in the second quarter of 2016.

At the same time, the supply of property for investment purposes fell in both the office and industrial sectors, but was broadly unchanged in the retail segment.

Overall, investment trends in the capital remain mixed. Industrial assets attracted a solid rise in investor interest during but overall enquiries were flat in the office sector and declined modestly in the retail segment.

However, foreign investment demand did in fact grow strongly across each sector of the capital, with the sharp decline in sterling since June’s referendum vote particularly prominent in enticing overseas demand.

At a national level, near term capital value expectations remained mildly positive across all sectors with 14% more respondents projecting values to rise rather than fall over the coming quarter.

Over the next 12 months respondents anticipate capital values will increase across the majority of sectors, led by the prime industrial market. In terms of the headline picture, 28% more respondents expect to see a rise rather than fall in capital value over the next 12 months.

Occupier demand is less buoyant than that from investors, with demand increasing only modestly at the all-sector level. However, the report points out that this was driven entirely by industrial property with demand flat in both office and retail sectors.

The lack of demand prompted landlords to increase the value of incentive packages on offer to prospective tenants in both these sectors. In the office sector, inducements have now risen in each of the last two quarters at the headline level, the first time this has happened since 2013, with 14% more respondents seeing a rise in the fourth quarter of 2016.

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International Commercial InvestmentNew investor demand in UK commercial property market rebounds post Brexit

UK shrugs off Brexit fears to be fastest growing G7 economy in 2016

by International Commercial Investment on January 26, 2017

Source: Financial Times

The UK was the fastest growing economy in the G7 last year and is not yet showing any signs of the slowdown that many economists predicted would follow the vote to leave the EU in June.

The economy grew by 0.6 per cent in the fourth quarter of 2016, according to a first estimate from the Office for National Statistics. Growth for the year as a whole was 2 per cent, slightly slower than the 2.2 per cent figure for 2015.

The preliminary estimate for the fourth quarter was above the consensus forecast of 0.5 per cent growth and there were no revisions to the second and third quarter figures.

“Strong consumer spending supported the expansion of the dominant services sector and although manufacturing bounced back from a weaker third quarter, both it and construction remained broadly unchanged over the year,” said Darren Morgan, head of GDP at the ONS.

Welcoming the figures, Philip Hammond, the chancellor, said he believed there were signs that the positive effect from sterling’s depreciation on demand for British exports is outweighing the negative effects expected to come from rising inflation.

“What we have already seen is a slower pass through rate of currency-driven inflation pressure than many people predicted,” said Mr Hammond. He said the “highly competitive” nature of the UK’s retail market left “question marks” about how much retailers would pass rising costs on to consumers: “I think the evidence so far is that there has been quite‎ a damping effect.”

But Simon Kirby, of the National Institute of Economic and Social Research, said it was “too early” to judge the effects of the weaker pound.

The new GDP figures show growth at the end of last year was driven by the services sector, which grew by 0.8 per cent. Services make up 79 per cent of the UK economy.

Consumer-focused industries such as retail sales and travel agency services performed particularly well. The output of travel agencies expanded by 7.3 per cent in the fourth quarter.

The manufacturing sector also grew strongly, expanding by 0.7 per cent and reversing much of the contraction of the third quarter. This was mainly because of changes in production of pharmaceuticals, which can be volatile.

But overall industrial production was dragged down by a sharp contraction — of 6.9 per cent — in mining and quarrying output, partly because of the temporary shutdown of the Buzzard oilfield in the North Sea.

Total industrial production was unchanged from the previous quarter, construction output grew by just 0.1 per cent and agricultural production increased by 0.4 per cent. All three sectors had contracted earlier in the year.

But economists continue to predict that the vote for Brexit will have long-term economic costs.

“The economy’s brisk growth at the end of 2016 has all the hallmarks of being driven by an unsustainable consumer spending spree,” said Samuel Tombs of Pantheon Macroeconomics.

“Consumers appear to have turned to debt to spend more.”

According to figures published by the British Bankers’ Association on Thursday, consumer borrowing continued to rise in December, but Rebecca Harding, BBA chief economist, said: “There are early indications that 2017 could see softer demand for credit from business and households, as they anticipate future interest rate rises and wait for further clarity on Brexit.”

Andrew Sentance, a former Bank of England Monetary Policy Committee member who now works for PwC, expects growth to slow to 1.5 per cent this year, saying: “2017 will be a more testing year for the UK economy as consumer spending will be squeezed by rising inflation”.

The ONS produces its first estimate of GDP more quickly than most other statistical agencies. But it does so with only 40 per cent of the required data and the preliminary figure is subject to revision.

Updated estimates of GDP growth, along with a breakdown by categories of expenditure and income, will be published over the next two months.

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International Commercial InvestmentUK shrugs off Brexit fears to be fastest growing G7 economy in 2016

Property Investment in England: Overview England

by International Commercial Investment on January 16, 2017

There are many words to describe England: royal, rural, industrial, historical or iconic to name but a few. And every year property hunters come here in search for the perfect investment. So which area offers what and where are you best off to find what you’re looking for?

Property in England is a big thing. Owning a home used to be every Brits’ sole dream. Whilst this is now shifting somewhat and Generation Rent is growing, property investor are becoming more and more interested in the country.

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International Commercial InvestmentProperty Investment in England: Overview England

FTSE 100 hits new RECORD high as Britain’s Brexit economy boom continues

by International Commercial Investment on January 12, 2017

Source: The Express

THE FTSE 100 has surged to ANOTHER record high during Thursday morning trading, as the positive economic news continues to flow following the Brexit vote.

Britain’s top share index crept up by about 0.3 per cent to reach 7,211, indicating fresh confidence in the UK’s biggest companies as Britain gears up to leave the European Union (EU).

The index was boosted by Persimmon’s latest trading update this morning, which added to the picture of Britain’s positive economic outlook.

The homebuilder posted an eight per cent increase in full-year revenue to £3.14billion and a four per cent rise in total sales.

It comes as Britain’s manufacturing, construction and service output in December smashed expectations, figures this week have revealed.

Service sector expansion, which accounts for around 75 per cent of the economy, was measured at 56.2 form rom 55.2 in November by the highly-regarded Markit/CIPS services purchasing managers’ index (PMI).

Any reading above 50 indicates growth, expectations for the sector had been at 54.7.

Michael Hewson, chief market analyst at CMC Markets UK, said: “Equity markets have got off to a solid start this year with the FTSE100 making new all-time highs this week, helped by a continuation of the trends seen at the end of last year, namely that of firmer commodity prices, improving economic data, and rising inflationary pressures.”

Economists believe fourth quarter economy growth is set to once again defy the Brexit doom-mongers who had warned of a slowdown following the vote to leave.

Scott Bowman, UK economist at Capital Economics, said:”December’s Markit/CIPS report on services suggests that the UK economy will turn in another strong performance in Q4 and hasn’t lost any momentum since the vote to leave the EU.”

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International Commercial InvestmentFTSE 100 hits new RECORD high as Britain’s Brexit economy boom continues

UK industry ‘booms back to life’ as manufacturing drives growth

by International Commercial Investment on January 12, 2017

Source: The Telegraph

UK industry “boomed back to life” towards the end of last year, putting the economy on course to maintain the strong pace of growth enjoyed in the aftermath of the Brexit vote.

Industrial production rose by 2.1pc in November compared with October, driven by strong manufacturing output and the reopening of the North Sea’s biggest oil field following a shutdown.

The Office for National Statistics (ONS) said manufacturing output increased by 1.3pc month-on-month in November, driven by growth in pharmaceuticals, which saw double-digit growth.

Economists at the National Institute of Economic and Social Research said the data put the economy on course to grow by 0.5pc in the final three months of 2016, following growth of 0.6pc in the quarter to September.

This would mean the economy expanded by 2pc last year, which is only slightly weaker than the 2.2pc growth seen in 2015.

Alan Clarke, an economist at Scotiabank, said November’s “boom” in industrial output would help to reverse October’s “poor start” and drive the economy towards an expansion of “at least” 0.5pc in the final quarter of 2016.

However, statisticians described some of the industrial data as “volatile”, while separate figures showed construction output fell by a monthly 0.2pc, against expectations for a rise of 0.2pc.

Official trade data also showed Britain’s trade deficit widened by £2.6bn in November compared with the previous month, to £4.2bn.

This was mainly due to a £3.3bn increase in imports, which was only partially offset by a £0.7bn rise in exports.

Kate Davies, a senior statistician at the ONS, described Wednesday’s data as “paint[ing] a mixed picture of the UK’s economic performance”.

However, Paul Hollingsworth, an economist at Capital Economics, highlighted that the three-month growth rate of goods exports returned to positive territory in November, while growth in import volumes slowed.

“This tentatively suggests that net trade may have made a positive contribution to GDP growth in the final quarter.

“So, overall, the latest figures suggest that economic growth has maintained pace, and is starting to become better balanced.

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International Commercial InvestmentUK industry ‘booms back to life’ as manufacturing drives growth

UK economy grows faster than expected in Q3

by International Commercial Investment on December 26, 2016

Source: RTE

Britain’s economy grew more strongly than expected in the third quarter, showing no sign of any slowdown from June’s Brexit vote, but the country’s current account deficit rose back towards record levels.

The economy expanded 0.6% in the three months to September, the Office for National Statistics said, revised up from an earlier reading of 0.5% that economists had expected to remain unchanged.

But growth was revised down by 0.1% in the first and second quarters of the year to 0.3% and 0.6% respectively.

While the figures confirmed that Britain’s economy performed more robustly than economists expected after the vote to leave the European Union, there was no sign that sterling’s sharp fall had boosted exports.

The figures showed a markedly worse picture for trade and growth was more reliant on domestic demand than previously thought.

“Robust consumer demand continued to help the UK economy grow steadily in the third quarter of 2016,” ONS statistician Darren Morgan said.

Net trade acted as a drag of 1.2% on third quarter growth, the biggest drag since early 2012 and compared with an initial estimate that trade had offered a 0.7% boost to the growth rate.

This reflected corrections the ONS recently made to trade data due to a miscalculation in the trade of gold.

Britain’s current account deficit widened to £25.494 billion from a downwardly revised £22.079 billion in the second quarter.

While lower than the £27.45 billion expected by economists, it caused the deficit to rise to 5.2% of gross domestic product from 4.6% – approaching a record 6% seen in late 2013.

In the run-up to June’s referendum, Bank of England Governor Mark Carney said Britain relied on the “kindness of strangers” to meet its financing needs – something that could fade if Britain became a less attractive investment destination.

Sterling tumbled after the Brexit vote, which most economists think should ultimately reduce Britain’s current account deficit by curbing imports, and boosting exports and the sterling returns from Britain’s overseas investments.

But some economists warn Britain could still be vulnerable if its overseas funders become nervous about their investments – particularly if it looks like Britain will end up with a bad deal in its divorce from the European Union.

Rising inflation caused by the pound’s post-referendum plunge looks set to squeeze household spending and economists said they still expected business investment to slow.

Compensation of employees rose at its fastest annual rate since the second quarter of 2013, up 4.5% on the year but rising inflation meant that in real terms, household income growth on the year slowed to 0.3% – its weakest rate in two years.

Households ate into their savings, with the savings ratio dropping to its lowest since the third quarter of 2008.

Growth in business investment slowed, revised down to 0.4% on a quarterly basis from 0.9%.

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International Commercial InvestmentUK economy grows faster than expected in Q3

Business investment boosts UK economic growth after Brexit vote

by International Commercial Investment on December 2, 2016

Source: FT.com

Better than expected business investment and consumer spending drove UK economic growth in the three months following the EU referendum, according to detailed figures published by the Office for National Statistics.

Business investment increased 0.9 per cent in the third quarter of 2016 compared with the previous three months, instead of a consensus prediction of a 1 per cent decline.

Business investment has been at the centre of the debates about how the UK economy will be affected by the Brexit vote, with economists expecting companies to slow their investment because of uncertainty about future trade arrangements. There was no evidence of this in the third quarter, however.

“Investment by businesses held up well in the immediate aftermath of the EU referendum, though it’s likely most of those investment decisions were taken before polling day,” said Darren Morgan, head of GDP at the ONS.

Mr Morgan added: “Business investment, coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.”

GDP growth was not revised in either direction from an initial estimate of 0.5 per cent, the release on Friday said.

Business investment covers the creation of new non-financial assets such as buildings, machinery and intellectual property.

“Uncertainty indicators ahead of the referendum and in the immediate aftermath were pointing to the kind of uncertainty that would lead corporates to hold back a bit,” said Peter Dixon, UK economist at Commerzbank. But he added that it was “too early to declare victory” because companies take a long time to adjust their investment decisions.

On Wednesday the Office for Budget Responsibility, which produces independent forecasts for the UK government, published a forecast that reductions in business investment would reduce the country’s long-term economic potential by 1.1 per cent by 2018. This prompted anger among pro-Leave politicians, who accused the OBR of producing “another utter doom and gloom scenario” and called its forecasts worthless.

Defenders of the OBR fought back by pointing out that many of its predictions were noticeably more positive than those made by other bodies, including the Treasury.

For the third quarter the rest of the increase in GDP was explained by household consumption increasing 0.7 per cent, government consumption growing by 0.4 per cent and the UK’s trade deficit narrowing slightly compared with the previous quarter.

However, big swings in the amount of gold held by British households and companies rather than trade in other goods and services accounted for the improvement in the trade balance. This is a very volatile part of GDP and unlikely to be related to any fundamental change in the economy.

Employee compensation — wages, pension contributions and in-kind payments — increased 0.7 per cent, unadjusted for inflation. This was the biggest contributor to growth in incomes. Corporate profits rose 0.2 per cent.

The index of services, which was published the same day, showed growth in the sector had kept pace with recent trends. Services account for about 80 per cent of the UK’s economic output.

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International Commercial InvestmentBusiness investment boosts UK economic growth after Brexit vote

UK third quarter GDP growth confirmed at 0.5%

by International Commercial Investment on December 2, 2016

Source: BBC

The UK economy grew by 0.5% in the third quarter, official figures have confirmed, helped by export growth and stronger consumer spending.

In its second estimate of the health of the economy, the Office for National Statistics (ONS) also says business investment grew by more than expected.

That was up 0.9% following the Brexit vote, against the second quarter, although it was down on last year.

There will be a third estimate of the figures in December.

“Investment by businesses held up well in the immediate aftermath of the EU referendum, though it’s likely most of those investment decisions were taken before polling day,” Darren Morgan, an ONS statistician, said.

“That, coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.”

The figures cover the period from July to the end of September and the ONS said the growth in gross domestic product suggested limited effect so far from the EU referendum at the end of June.
Sharp slowdown

However, it is expected that the effects of the Brexit vote and the fall in sterling will begin to feed through in the coming months.

The Office for Budget Responsibility, which provides independent economic forecasts and analysis, said on Wednesday that it expected the economy to grow by 1.4% in 2017, down from the 2.2% it predicted in March. It cut its forecast for growth in 2018 to 1.7%, down from 2.1%.

The “near-term strength of the economy after the Brexit vote is unlikely to persist”, said Samuel Tombs chief UK economist with Pantheon Macroeconomics.

“The outlook for stagnation in real incomes next year, as inflation rockets, points to a sharp slowdown in consumer spending growth ahead,” Mr Tombs added.
Analysis: Jonty Bloom, business correspondent

The British economy continued to grow following the vote to leave the EU and so has business investment, although there had been fears that both would be hit immediately by the decision to leave the EU.

It is the huge services sector that kept the economy growing. Services increased by 0.8%, driven by a continued strong performance on the British High Street as sales continue to boom. But all the others sectors of the economy, manufacturing, agriculture and construction, are contracting.

It is however the business investment figures which are the most encouraging. They show investment is continuing to grow, despite fears that businesses would slam on the brakes following the Brexit vote, if only temporarily, because they were uncertain about what the future holds.

The ONS says business investment held up well after the vote to leave the EU, although it also added that most decisions on investment in this period were probably taken before the referendum result was known.

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International Commercial InvestmentUK third quarter GDP growth confirmed at 0.5%