Sorry for interrupting, this website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Learn more
Accept & Close

Commercial Property - UK - June 2016

“UK commercial property yields have generally edged down between April 2013 and April 2016, reflecting stronger investor demand across most sectors. Investor buying power has been boosted by the improving availability of finance, with high competition keeping lending margins under pressure, particularly at the prime end of the market. However, Savills reported a slight upward trend in yields in the first quarter of 2016. This was largely a reflection of increased investor uncertainty due to the upcoming EU referendum and fears surrounding the strength of the global economy. The considerable uncertainty created by the Brexit vote is set to further negatively impact investor sentiment.
– Claudia Preedy - B2B Analyst

This report answers the following key questions:

  • How have key sectors of the commercial property market performed over the last few years?
  • Who are the biggest investor types in the key sectors of the commercial property market?
  • Which sectors of the market are most attractive to investors?
  • How is the market expected to perform over the next few years?

The terms of reference for this report concern the UK commercial property market, which includes owner-occupied and investor owned properties. The report focusses on investors’ share of the market.

Commercial property is defined as including retail, offices, industrial premises (warehouses and most types of factory), and ‘other commercial’ properties typically used for business purposes, such as leisure (cinemas, fitness clubs and gyms, leisure parks, etc.), hotels, petrol stations and other miscellaneous types. The report excludes other commercial property sectors, such as health and education, museums and libraries, sports grounds, courts and prisons, heavy industrial plants, infrastructure and open structures such as theme parks.

What you get

What's included

Why buy from us?

Succeed

Our reports will provide you with market data, consumer research and competitive intelligence to succeed in your market.

Instant Access

Buy now and you'll have instant access to the information you need to make the right decisions.

Opportunities

Find out what's next in the markets that matter to you: where opportunities lie and what challenges you will face.

Trusted

A business Superbrand, Mintel is a source you can trust. We have been defining and refining the Market Intelligence mix since 1972.

Table of contents

  1. Executive Summary

      • The market
        • Commercial property market displays robust performance in 2014 and 2015
          • Figure 1: Value of UK commercial property market, 2010-15
        • Commercial property continued to offer double-digit returns for investors in 2015
          • Annual returns set to moderate in 2016
            • Figure 2: Investor-owned share of UK commercial property market, 2010-15
          • Retail represents largest sector of commercial property market
            • Office sector leads growth in commercial property market
              • Buoyant demand for logistics space drives industrial property market
                • Healthy investor appetite for ‘alternative’ assets
                  • Figure 3: Segmentation of the UK commercial property market, by sector, 2011-15
                • Market factors
                  • Low interest environment exerts positive influence on commercial property market
                    • Relaxation of planning policy for the conversion of office space into residential use contributes to current office space supply shortages
                      • Companies
                        • Overseas investors represent the largest investor type in the UK commercial property market
                          • Strong rise in foreign investment – especially in London office sector
                            • Real Estate Investment Funds (REITs) dominate shopping centre sector
                              • UK institutions hold about a fifth of the investor-owned commercial property stock
                                • Figure 4: Holdings in commercial property market, by investor type, 2015
                              • What we think
                              • Key Insights

                                  • Do potential interest rate rises pose a threat to the commercial property market?
                                    • What have been the recent trends in commercial property yields?
                                      • What are the recent trends in the type of commercial property investors are attracted to?
                                        • Outside the south east, which region is expected to provide the strongest opportunities for investors?
                                        • Introduction

                                            • Definitions
                                              • Methodology
                                                • Abbreviations
                                                  • Market positioning
                                                    • The Commercial Property Performance Cycle
                                                    • UK Economy

                                                      • Overview
                                                        • Figure 5: UK GDP quarterly development, 2003-16
                                                        • Figure 6: UK GDP in economic downturns and recoveries since 1979
                                                      • Inflation
                                                        • Interest rates
                                                          • House prices
                                                            • Figure 7: UK house price changes, 2004-2016
                                                          • Consumer spending
                                                            • Manufacturing
                                                              • Figure 8: UK manufacturing, 2013-16
                                                            • Business investment
                                                              • Figure 9: UK GFCF 2003-15
                                                            • Imports
                                                              • Exports
                                                              • Market Factors

                                                                • Key points
                                                                  • Economic factors
                                                                    • Record low interest rates provide positive impetus for investment market
                                                                      • UK Purchasing Manager Index (PMI) for Services Industries
                                                                        • UK Manufacturing Purchasing Manager Index (PMI)
                                                                          • Retail sales and rise in online sales
                                                                            • Figure 10: Growth of value of retail sales at current prices seasonally adjusted, 2010-16
                                                                          • Other factors
                                                                            • Impact of planning laws on commercial property supply
                                                                              • Supply and demand factors
                                                                                • Business rates
                                                                                  • Return on property investment
                                                                                    • Figure 11: IPD UK Annual Property Index, December 2015
                                                                                  • New stamp duty rates for commercial property
                                                                                    • Non-residential property transactions
                                                                                      • Figure 12: UK non-residential property transaction completions, by country, 2010-15
                                                                                      • Figure 13: UK non-residential property transaction completions, 2011-15
                                                                                    • Private commercial construction output
                                                                                      • Figure 14: Long term trend in private commercial construction output in Great Britain, 1970-2014
                                                                                      • Figure 15: Analysis of private commercial construction in Great Britain, by type, 2011-15
                                                                                    • Private industrial construction output
                                                                                      • Figure 16: Long term trend in private industrial construction output in Great Britain, 197015
                                                                                      • Figure 17: Analysis of private industrial new construction work in Great Britain, by sector 2011-15
                                                                                  • Market Size and Segmentation

                                                                                    • Key points
                                                                                      • Overview
                                                                                        • Investors’ share of commercial property market on the up
                                                                                          • Investors moving into new sectors
                                                                                            • Impending EU referendum has put off investors during the first half of 2016 – subsequent decision to leave EU set to further negatively impact investor sentiment
                                                                                                • Figure 18: Value of UK commercial property market, 2011-15
                                                                                                • Figure 19: Value of UK commercial property market, 2009-15
                                                                                                • Figure 20: Investor share of UK commercial property market, 2011-15
                                                                                                • Figure 21: UK commercial property floorspace and rental value, 2008-14
                                                                                              • Market segmentation
                                                                                                • Segmentation by sector
                                                                                                  • Figure 22: Segmentation of the UK commercial property market, by sector, 2011-15
                                                                                                  • Figure 23: Sector share of investor-owned commercial property stock, 2015
                                                                                                • Segmentation by investor-type
                                                                                                  • Figure 24: Holdings in commercial property market, by investor type, 2013-15
                                                                                                  • Figure 25: Investor commercial property market, by sector, South East and Rest of UK, 2015
                                                                                              • Office Sector

                                                                                                • Key points
                                                                                                  • Overview
                                                                                                    • Overseas investors drive growth in London office sector
                                                                                                      • Shift away from owner-occupied offices
                                                                                                        • Strong investor appetite for UK prime offices
                                                                                                          • London offices
                                                                                                            • Developers and investors returning to speculative office developments
                                                                                                              • Figure 26: Capital value of the UK office market, 2011-15
                                                                                                              • Figure 27: UK offices market, by region, 2015
                                                                                                              • Figure 28: Office property transactions in Great Britain, 2013-16
                                                                                                              • Figure 29: Office property transactions by investor type, Year-to-date 2016
                                                                                                              • Figure 30: UK office floorspace and rental value, 2008-14
                                                                                                          • Retail Sector

                                                                                                            • Key points
                                                                                                              • Overview
                                                                                                                • Investor activity in core retail locations remained strong during 2015
                                                                                                                  • High street shops show strongest capital value growth in 2015
                                                                                                                    • Investor interest in supermarket assets wanes due to difficulties faced by large operators
                                                                                                                        • Figure 31: Capital value of the UK retail property market, 2011-15
                                                                                                                        • Figure 32: UK retail property market, by sector, 2015
                                                                                                                        • Figure 33: Retail property transactions in Great Britain, 2013-16
                                                                                                                        • Figure 34: Shopping centre property transactions by investor type, Year-to-date 2016
                                                                                                                        • Figure 35: Retail warehouse property transactions by investor type, Year-to-date 2016
                                                                                                                        • Figure 36: Shop/Supermarket property transactions by investor type, Yeartodate 2016
                                                                                                                        • Figure 37: UK retail floorspace and rental value, 2007-14
                                                                                                                      • Retail sector development pipeline
                                                                                                                        • Figure 38: Shopping centre development pipeline, 2004-15
                                                                                                                        • Figure 39: Retail warehouse development pipeline, 2004-15
                                                                                                                        • Figure 40: Grocery outlets development pipeline, 2004-15
                                                                                                                    • Industrial Sector

                                                                                                                      • Key points
                                                                                                                        • Overview
                                                                                                                          • Industrial & logistics sector remains attractive for investors
                                                                                                                            • Investors increasingly turning towards funding speculative developments
                                                                                                                                • Figure 41: Capital value of the UK industrial property market, 2011-15
                                                                                                                                • Figure 42: UK industrial property market, by region, 2015
                                                                                                                                • Figure 43: Industrial property transactions in Great Britain, 2013-16
                                                                                                                                • Figure 44: Industrial property transactions by investor type, Year-to-date 2016
                                                                                                                                • Figure 45: UK industrial floorspace and rental value, 2008-14
                                                                                                                              • Upswing in speculative development in logistics sector driven by strong occupier demand
                                                                                                                                • Figure 46: Industrial speculative development under construction, May 2012-February 2016
                                                                                                                            • Other Commercial Sector

                                                                                                                              • Key points
                                                                                                                                • Overview
                                                                                                                                  • Investor confidence has returned to hotel sector
                                                                                                                                    • London remains one of the top markets for hotel transactions globally
                                                                                                                                      • Healthy hotel development pipeline in major cities across the UK
                                                                                                                                        • Figure 47: Active hotel development pipeline by grading, Q1 2016
                                                                                                                                      • Leisure sector returning to health in line with improved consumer spending
                                                                                                                                          • Figure 48: Capital value of the UK other commercial property market, 2011-15
                                                                                                                                          • Figure 49: UK “other” commercial property market, by sector, 2015
                                                                                                                                          • Figure 50: Property transactions in the leisure sector in Great Britain, 2013-16
                                                                                                                                          • Figure 51: UK “other” commercial floorspace and rental value, 2008-14
                                                                                                                                      • Regional Analysis

                                                                                                                                        • Key points
                                                                                                                                          • Regional analysis of non-domestic properties in England & Wales
                                                                                                                                            • Figure 52: Number of non-domestic rateable properties in England & Wales, by sector and region, as at 31 March 2015
                                                                                                                                            • Figure 53: Rateable value of non-domestic properties in England & Wales, by sector and region, as at 31 March 2015
                                                                                                                                          • Regional analysis of commercial property transactions
                                                                                                                                            • Figure 54: Commercial property transactions in Great Britain, by region, 2013-16
                                                                                                                                            • Figure 55: Regional importance in commercial property transactions, 2014-16
                                                                                                                                        • Market Trends

                                                                                                                                          • Key points
                                                                                                                                            • Development of commercial property yields
                                                                                                                                              • Figure 56: Prime market yields, by sector, 2013-16
                                                                                                                                            • Rental price developments
                                                                                                                                              • Figure 57: Prime office rents in the UK, December 2011- December 2015
                                                                                                                                              • Figure 58: Prime retail rents in the UK, December 2011-December 2015
                                                                                                                                              • Figure 59: Prime industrial rents in the UK, December 2011- December 2014
                                                                                                                                            • Trends in average lease lengths
                                                                                                                                                • Figure 60: Average length of leases, by tenant type, 2015
                                                                                                                                              • Shift from owner-occupied towards rented commercial property
                                                                                                                                                • Commercial property development activity
                                                                                                                                                  • Figure 61: Commercial development activity, 2010-16
                                                                                                                                                • Trends in commercial property lending
                                                                                                                                                  • Confidence in UK commercial property lending market starts to return in 2015
                                                                                                                                                    • Figure 62: Outstanding debt secured by commercial property lender, by lender type, 2015
                                                                                                                                                  • 2014 and 2015 witness a strong increase in the value of new loans on commercial property
                                                                                                                                                    • Figure 63: Allocation of loans secured by commercial property, by lender-type, 2015
                                                                                                                                                    • Figure 64: Allocation of loan books by property sector, 2004-14
                                                                                                                                                  • Loan-to-value ratios fall in 2015, suggesting good lender discipline despite the strength of the market
                                                                                                                                                  • Industry Structure

                                                                                                                                                    • Key points
                                                                                                                                                      • Overview
                                                                                                                                                        • Overseas investors drive value growth of commercial property sector
                                                                                                                                                            • Figure 65: Holdings in commercial property market, by investor type, 2015
                                                                                                                                                            • Figure 66: Biggest investor type in each commercial property sector, 2014
                                                                                                                                                          • REITs
                                                                                                                                                            • Overseas investors
                                                                                                                                                              • Institutional investors
                                                                                                                                                                  • Figure 67: Holdings in buildings, property, land and new construction work by institutional groups, 2010-14
                                                                                                                                                                  • Figure 68: Net investment in buildings, property, land and new construction work by institutional groups, 2010-14
                                                                                                                                                              • Company Profiles

                                                                                                                                                                • British Land

                                                                                                                                                                    • Major recent acquisitions and disposals
                                                                                                                                                                      • Company strategy
                                                                                                                                                                          • Figure 69: Financial analysis of British Land, 2011-15
                                                                                                                                                                      • Land Securities

                                                                                                                                                                          • Company strategy
                                                                                                                                                                              • Figure 70: Financial analysis of Land Securities, 2011-15
                                                                                                                                                                          • Great Portland Estates

                                                                                                                                                                              • Company strategy
                                                                                                                                                                                • Figure 71: Financial analysis of Great Portland Estates, 2011-15
                                                                                                                                                                            • Hammerson

                                                                                                                                                                                • Company strategy
                                                                                                                                                                                  • Figure 72: Financial analysis of Hammerson, 2011-15
                                                                                                                                                                              • Intu Properties

                                                                                                                                                                                  • Company strategy
                                                                                                                                                                                      • Figure 73: Financial analysis of Intu Properties, 2011-15
                                                                                                                                                                                  • Derwent London

                                                                                                                                                                                      • Company strategy and outlook
                                                                                                                                                                                        • Figure 74: Financial analysis of Derwent London, 2011-15
                                                                                                                                                                                    • A & J Mucklow Group

                                                                                                                                                                                        • Company strategy
                                                                                                                                                                                            • Figure 75: Financial analysis of A & J Mucklow Group, 2011-15
                                                                                                                                                                                        • Hansteen Holdings

                                                                                                                                                                                            • Company strategy
                                                                                                                                                                                              • Figure 76: Financial analysis of Hansteen Holdings, 2011-15
                                                                                                                                                                                              • Figure 77: Turnover analysis of Hansteen Holdings, by geographic segment, 2011-15
                                                                                                                                                                                          • Daejan Holdings

                                                                                                                                                                                              • Company strategy
                                                                                                                                                                                                • Figure 78: Financial analysis of Daejan Holdings, 2011-15
                                                                                                                                                                                            • SEGRO

                                                                                                                                                                                                • Company strategy
                                                                                                                                                                                                    • Figure 79: Financial analysis of Segro, 2011-15
                                                                                                                                                                                                • Shaftesbury

                                                                                                                                                                                                    • Company strategy
                                                                                                                                                                                                      • Figure 80: Financial analysis of Shaftesbury, 2011-15
                                                                                                                                                                                                  • Workspace Group

                                                                                                                                                                                                      • Company strategy
                                                                                                                                                                                                        • Figure 81: Financial analysis of Workspace Group, 2011-15
                                                                                                                                                                                                    • Bruntwood

                                                                                                                                                                                                        • Company strategy
                                                                                                                                                                                                          • Figure 82: Financial analysis of Bruntwood, 2011-15
                                                                                                                                                                                                      • LondonMetric Property

                                                                                                                                                                                                          • Company strategy
                                                                                                                                                                                                            • Figure 83: Financial analysis of LondonMetric Property, 2011-15
                                                                                                                                                                                                        • Grosvenor Group

                                                                                                                                                                                                            • Company strategy
                                                                                                                                                                                                              • Figure 84: Financial analysis of Grosvenor Group, 2011-15
                                                                                                                                                                                                          • Standard Life Investments (Holdings)

                                                                                                                                                                                                              • Company outlook
                                                                                                                                                                                                                • Figure 85: Financial analysis of Standard Life Investments (Holdings), 2010-14
                                                                                                                                                                                                            • Legal & General Property

                                                                                                                                                                                                                  • Figure 86: Financial analysis of Legal & General Property, 2011-15
                                                                                                                                                                                                              • M&G Real Estate

                                                                                                                                                                                                                    • Figure 87: Financial analysis of M&G Real Estate, 2011-15
                                                                                                                                                                                                                • Market Forecast

                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                    • Commercial and industrial construction output forecast
                                                                                                                                                                                                                      • Figure 88: Forecast private commercial construction output in Great Britain, 2016-20
                                                                                                                                                                                                                      • Figure 89: Forecast of private commercial construction in Great Britain, by sector, 2016-20
                                                                                                                                                                                                                      • Figure 90: Forecast private industrial construction output in Great Britain, 2016-12
                                                                                                                                                                                                                      • Figure 91: Forecast of private industrial new construction work in Great Britain, by sector 2016-20
                                                                                                                                                                                                                    • Commercial property market forecast
                                                                                                                                                                                                                      • Investors increasingly reliant on rental income growth and asset management initiatives to drive performance, as returns are set to moderate
                                                                                                                                                                                                                        • Investor appetite for alternative assets remains strong
                                                                                                                                                                                                                          • Core regional centres attract increased investor interest
                                                                                                                                                                                                                              • Figure 92: Forecast of UK commercial property market, 2016-20
                                                                                                                                                                                                                              • Figure 93: Development of the UK commercial property capital value, 2010-15 (historic) and 2016-20 (forecast)
                                                                                                                                                                                                                              • Figure 94: Projected investor share of UK commercial property market, 2016-20
                                                                                                                                                                                                                            • Market forecast segmentation
                                                                                                                                                                                                                              • Figure 95: Forecast segmentation of the UK commercial property market, 2016-20
                                                                                                                                                                                                                              • Figure 96: Forecast segmentation of the UK commercial property market, 2016-20
                                                                                                                                                                                                                            • Key trends by sector
                                                                                                                                                                                                                              • Offices
                                                                                                                                                                                                                                • Retail
                                                                                                                                                                                                                                  • Industrial
                                                                                                                                                                                                                                    • ‘Other’ commercial property
                                                                                                                                                                                                                                    • Further Sources and Contacts

                                                                                                                                                                                                                                      • Trade associations and bodies
                                                                                                                                                                                                                                        • Trade exhibitions and conferences
                                                                                                                                                                                                                                          • Trade magazines

                                                                                                                                                                                                                                          Commercial Property - UK - June 2016

                                                                                                                                                                                                                                          US $1,321.06 (Excl.Tax)