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Jones Lang LaSalle UK Capital Markets Outlook 2009

Has the bottom of the UK investment market has been reached?


London, 21 January 2009 – Based on today’s evidence, average IPD initial yields for all UK property are forecasted to reach a peak of 8% plus by late summer 2009 according toJones Lang LaSalle’s UK Capital Markets Outlook Report 2009.

Julian Stocks, Head of Capital Markets, England at Jones Lang LaSalle, said: “Drawing on current analysis and lessons from the past, we believe IPD initial yields will bottom out in Quarter 3 2009; and look set to remain at that level for the rest of the year.”

Jones Lang LaSalle forecasts commercial property rents will decrease across all sectors in 2009 and 2010 with the largest fall for the office market where IPD average rents across the UK are anticipated to decline by 11%.

Julian Stocks added: “We expect a bounce back in average rents from 2011 onwards as the economy recovers. The main risk to the forecasts is a more prolonged and deeper downturn in the UK and global economy and, in these uncertain times, we will continue to monitor developments closely.”

Jones Lang LaSalle expects IPD All-Property average total returns of between -7% and -12% in 2009, reflecting falling rental value combined with negative investor sentiment. Returns will improve gradually and 2008 will therefore represent the lowest level of returns in this cycle.

Julian Stocks concluded: “Our view is that we are through the worst in terms of negative totals returns and they will begin to improve gradually from today. Investors and policy makers alike are unable to predict with any degree of certainty when the turmoil in financial markets will end, so our forecasts are subject to regular review.”

Going forward Jones Lang LaSalle expects the following:

· Some experienced investors have already begun looking for opportunities, wanting to be ahead of the game in acquiring assets at cheap, if not, rock bottom prices.

· Non-UK investors have the opportunity to benefit from the current weakness in sterling.

· Signals that the markets are getting more confident are likely to include a rise in share prices of the major property companies and REITS, although some of these organisations will remain constrained by high levels of gearing.

· Another signal will be when the negative sentiment in property derivatives pricing for the 2010 and 2011 maturities eases.