Forecast for 2012
Success in a year of challenge is gratifying. 2011 has been a tough year to close deals, requiring innovation and patience. Commercially it has been a highly successful year for JK.
The economy and global financial challenges have caused a great deal of volatility in the property sector in the north east of England. We have seen the London property market move ahead relatively strongly, with the regions falling back showing a widening gap.
Shortage of finance and low demand has had an adverse impact with lower values and rents. Lease lengths have shortened and incentives increased.
2012 starts with the Bank of England giving a caution about the global economy for the next year. General property forecasts say that the housing sector will show a 1% fall and commercial property 5% fall in values over the next twelve months.
In the north east we have not yet seen the full impact of government cuts in spending and where we have the biggest exposure in public sector employment, the effect on jobs, although at the end of 2011 the north east has the highest unemployment across the UK.
There is still a market but there must be realism about price, rents and incentives to achieve sales and lettings. It is likely that this will continue through the year, with a degree of stability, albeit at a relatively low level.
Investment sales will continue to maintain good yields where there is a good tenant on a ten-year lease and with a good record of paying rent punctually.
Development will be limited to bespoke schemes where the end occupier is willing to absorb the gap between lower end value and higher development costs. This is unlikely to change until demand increases and we see a reduction in incentives and growth in rents to justify development.
Industrial property is maintaining a fair level of demand but no rental growth. There is a good take up of new space and when this is taken up there is little left other than poor quality older space. This sector may see the earliest change of increasing rents to justify development.
At the time of writing we are waiting the results of retail spending and a judgement of the direction of the retail property sector; this is likely to be continuing falling demand.
Government policy in economic regeneration and the drive toward localism has yet to have an impact. The Regional Growth Fund is about creating early jobs. The Growing Places Fund is announced by Tees Valley Local Enterprise Partnership calling for bids by 27 January and the North Eastern LEP will not be far behind. This should kick-start some stalled developments and create a rolling programme for others to create jobs, growth as well as housing. Such other policy of investment in infrastructure is more long term and will be slow in its impact on the property market. Other supportive action such as the National Planning Policy Framework is about making the securing of development much more efficient and less costly. If this can work then that will be very helpful in lowering the hurdles and removing barriers.
2012 will be a year of improving the worth of the property asset for the investor and reducing waste for the occupier.
JK’s service provides for both and we are happy to discuss your needs.
Community Infrastructure Levy
Building a Strong Team Despite Tough Times
JK is delighted to announce the appointment of Jonathan Dent.
New Office for Renewable Energy Services
JK is delighted to announce the completion of a lease to RES at Maingate, Gateshead.
Sunderland: New River Wear Bridge
JK was delighted to learn after much hard work the success of Sunderland Council in receiving government approval for the new £80 million Weir Bridge.
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