8/2/2019 UK Property Snapshot March 2012

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PROPERTY SNAPSHOT

www.colliers.com/uk

Economy The components of GDP growth for Q4 11 show that business investment is the principal

constraint on recovery. Capital formation and inventory growth fell by 2.8% and 0.8% q/q

respectively, osetting positive contributions from export and household spending at 2.3%and 0.5% q/q. Moderating ination expectations may be supporting household spending.

Despite Januarys improved ination gures (CPI and RPI registered 3.6% and 3.9%

respectively, with core ination down to 2.7%), weak sterling, political turbulence in the MiddleEast and the consequent surge in oil prices is acting to undermine condence. Brent spot

prices denominated in sterling remain very high and UK energy price ination has been in

double-digits since September 2011, registering 16% y/y in January 2012.

Colliers view: UK economic sentiment should continue to improve, although Eurozone developments

and worries about an oil price shock are impacting on condence.

Investment February transaction levels remained muted. Institutions remain well o the pace, with foreign

investors continuing to dominate the market. Qatar Holdings and St Martins (Kuwait) made the

largest purchases in February. Net lending to commercial real estate contracted further in

Q4 11 to -2.3bn and may contract further as UK banks become subject to new FSA capital

requirements based on the quality of existing real estate loan portfolios. Sales of distressedassets and loans are likely to rise. UK institutional funds plan to increase senior debt exposure

with AXA intending to exploit the exceptional market conditions for senior lending; much of

this activity may focus on purchases of existing loan portfolios rather than new origination.

Retail Shops: Given the perception of a weakened price prole, funds are holding assets,hence very little activity. Shopping Centres: Westeld sold three centres (Belfast, Tunbridge

Wells and Guildford) to Hermes for 159m as it refocuses on core investment and non-JV

development strategies. Land Securities is selling St Johns in Liverpool in response to

pressure to develop or dispose. Retail Warehouses: UK fund appetite for retail parks with long

income is unabated. Aberdeen Asset Management bought Elms RP in Wisbech (35-year lease

to Morrisons and B&Q) for 24.5m at 5.3% IY.

O ces: Interest in Central London remains strong. City: Interest is focused on single let assets.

Qatar Holdings completed a Sale & Leaseback of the Credit Suisse UK headquarters at

1 Cabot Square for 325m at 5.4% IY. St Martins bought 1 Bunhill Row (Slaughter & May) for180m at 5.5% IY. Asian interest also remains strong, although pricing is being tested anddeals are protracted, with some falling out altogether. West End: Amazon Properties has

acquired development sites at Park Crescent East and Bolsover Street for 47m and 21m

respectively. Aberdeen put 3 St Jamess Square (2014 lease expiry) on the market for 65m

at 4.5%. Welput put its multi-let Grade A redevelopment at 5 Stratton Street on the market

for 170m at 4.1% IY; this should prove to be a good test of market appetite. Regional: Very

quiet, although Callaghan Square in Cardi (leased to Eversheds until 2022) sold for 25.5mat 6.5% IY.

Industrial: Fund appetite for multi-let industrial parks continues as the SEGRO sale of ve

fully let industrial parks to Ignis suggests; the assets changed hands for 80.2m at 6.3% IY.

Otherwise, activity is very limited.

Colliers view: Transaction levels remain limited as investors take stock, revisit strategies and

refocus on core assets. Real estate nance remains absent with few signs of improvement.Capital values are stable, but being tested, including prime.

RESEARCH & FORECASTING UK

MARCH 2012 | PROPERTY SNAPSHOT

-3%

-2%

-1%

0%

1%

2%

Q4-08

Q1-09

Q2-09

Q3-09

Q4-09

Q1-10

Q2-10

Q3-10

Q4-10

Q1-11

Q2-11

Q3-11

Q4-11

Others Net ExportInvestment GovernmentHousehold GDP (%QoQ)

%q

uarter

onquarter

GDP GROWTH COMPONENTS

Source: ONS

OIL PRICE & EXCHANGE RATE

Source: EIA, Bank of England

CHANGE IN UK REAL ESTATE LENDING

Source: Bank of England

0

10

20

30

40

50

60

70

80

0

20

40

60

80

100

120

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

GBP (eective rate Jan-05 = 100)Brent spot in /barrel (RHS)

index

6,000

4,000

2,000

0

2,000

4,000

6,000

8,000

0,000

2,000

Q4-01

Q4-02

Q4-03

Q4-04

Q4-05

Q4-06

Q4-07

Q4-08

Q4-09

Q4-10

Q4-11

millions,

GBP

8/2/2019 UK Property Snapshot March 2012

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Disclaimer: This report gives information based primarily on published data which may be helpful in anticipating trends in the property sector. However,no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation to the forecasts, gures or conclusions contained in itand they must not be relied on for investment purposes. This report does not constitute and must not be treated as investment advice or an oer to buyor sell property. March 2012 12058

Colliers International is the licensed trading name of Colliers International UK plc. Company registered in England & Wales no. 4195561. Registeredoffice : 9 Marylebone Lane, London W1U 1HL.

Accelerating success.

PROPERTY SNAPSHOT | MARCH 2012

Occupier marketsRETAIL Consumer condence improved in January; the Nationwide barometer rose from 38 to 47.

ONS sales volume growth also accelerated from 0.5% m/m in December to 1.3% m/m in

January. Falling ination may partly explain this sales buoyancy, but continued discounting is

also being used to drive sales. The retail price deator fell from 2.7% y/y in December to 1.9%

y/y in January.

Retail job losses in January are estimated at 3,526. Bon Marche, La Senza, Peacocks andPumpkin Patch failed. Edinburgh Woollen Mill bought Peacocks and will re-open 75 of 224

stores; Alshaya bought La Senza and will re-open 60 of 120 stores; and Sun European bought

Bon Marche and will continue to operate 230 of 390 shops.

Colliers view: Unchanged. Retail sales gures are improving, but further administrations are

expected, rents are falling and landlords continue to brace themselves for further stress.

OFFICES Experians February employment headcount forecasts show an inner London nancial service

contraction of 2,304 jobs in 2012, with recovery forecast for 2013; business services, though,

remain positive throughout the forecast horizon.

City: Little activity reported in the 100,000 sq ft+ bracket and few new bona de requirements

are coming through, although the Prudential Regulation Authority may conclude a deal to take

150,000 sq ft at 20 Moorgate. Prime quoting rent in the City is 57.50 psf, but few deals havecompleted at that level. Rent free periods are static at just over 12 months. West End:

Technology companies remain active, looking for quality wherever they can nd it. Limited

supply continues to support rents with several submarkets seeing substantial growth. Prime

quoting rent is 95.00 psf and is likely to be pushed higher.

Regional: Experian forecasts follow the inner London pattern, with nancial and business

services growth expected to oset government downsizings by a wide margin. The Big Six

markets have greater activity, with a rumoured record rent of 32 psf achieved in Edinburgh.

Tenants are also less discriminating. The Thames Valley is alleged to have several large

opportunistic requirements. Anecdotal evidence suggests that M&A activity is up, but limited to

sub-50m deals; the impact on occupier markets is not yet apparent.

Colliers view: City rents are stable, although demand is at in the prime 100,000 sq ft+

segment. West End availability is also tight and interest in non-core areas is increasing, as are

rents. Regional centres are seeing greater activity.

INDUSTRIAL In parallel with limited February investment activity, there has also been little movement in the

industrial leasing markets. Grade A distribution and industrial park space remain in very short

supply, but the evidence suggests that many companies are taking stock, revisiting strategiesand making do with sub-optimal space rather than upgrading or acquiring new facilities.

Colliers view: Unchanged. Leasing demand and development remain o the pace due touncertainty. The development pipeline remains very limited.

Residential The Nationwide Index fell by 0.2% m/m in January taking the annual rate down to 0.7% y/y. Incontrast, the Halifax Index increased in January by 0.6% m/m, but the annual rate is still negative at

-1.6%. On balance, house prices were generally stable in 2011, although highly variable across regions.

Mortgage approvals are rising, possibly in response to the end of March stamp duty relief deadline;

rst-time buyers accounted for a 10% increase in mortgage lending in January, according to theCouncil of Mortgage Lenders. Foreign interest in prime Central London continues unabated,

although prime Central London rental growth has cooled as City bonus expectations and

recruitment demand softens.

Colliers view: Unchanged. House prices are generally stable, with modest declines expected in

2012. Lending volumes continue to improve, but rst time buyers are still locked out. Foreign

interest continues to support prime markets, increasingly outside of London.

For further information, please contact:

Walter Boettcher

+44 20 7344 6581

walter.boettcher@colliers.com

RETAIL SALES VOLUMES GROWTH

Source: ONS

-10

-8

-6

-4

-2

0

2

4

2011 2012 2013 2014 2015

TotalAnnual

Change

(000's)

Public Administration

Financial Services

February Forecasts

INNER LONDON EMPLOYMENT

Source: Experian

www.colliers.com/uk

REGIONAL HOUSE PRICE GROWTH (Q4 11)

Source: Halifax

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

London

East

Wales

SE

WM

EM

Scot

UK

SW

NW

Y&HN

I

%y

ear

onyear

-4%

-2%

0%

2%

4%

6%

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

All Retail (ex petrol)

Retail Sales Deator (ex petrol)

%

yearonyear