2015 to see 'solid performance' from commercial property

According to its Outlook 2015 document released today, London experienced the strongest rental growth in 2014 and the firm expect it to stay in the lead over the next 12 months. The recovery in the economy combined with low levels of development means that the balance between demand and supply is now swinging in favour of landlords.

The report notes that risks to its outlook include the possibility that UK economic growth is much weaker than forecast, so that the upswing in rents stalls rather than accelerates.
 

While rental growth outside London is patchier, some regional markets are definitely coming 'out of hibernation'. However, Schroders remain 'sceptical' about the prospects for a widespread recovery in retail rents outside London.  Although total retail sales are now increasing quite quickly, most of the growth is online and the latest wave of bank branch closures (as people convert to mobile banking) is a reminder of the structural challenges facing retail property.

Duncan Owen, Head of Real Estate, Schroders, said:

“While rental growth outside London is patchier, some regional markets are definitely coming out of hibernation. Given a reasonably high yield and a further rental growth as the economy improves we expect that next year will see another solid performance from UK commercial real estate."