As
the temperature in the UK crashes and white snow dashes the hills around I have
had time to think about the market more in general. It is an interesting time –
a lot of focus is on the cost of finance, the will it or won’t it debate. There
is a lot of momentum behind the MPC increasing interest rates but I do still
feel sceptical that 2015 is the right time.
Indeed the UK’s economy grew by 2.6%
last year, the fastest pace since 2007 and up from 1.7% in 2013, however the
figures from the ONS show that the economy only grew by 0.5% in Q4 2014, down
from 0.7% - it all just feels a little bit too early to start rocking the boat.
Europe’s real estate industry expects to be busier and more profitable
in 2015, despite concerns over weak fundamentals and economic conditions. The
five leading cities for investment prospects in 2015 are a mix of German
stalwarts and recovery plays: Berlin is top, followed by Dublin, Madrid,
Hamburg and, in a remarkable revival, Athens. Dublin’s ranking and Athens’ rise
reflect the opportunistic streak that runs through Europe. Madrid’s ranking,
too, reflects a capital surge into Spain that started in 2013 and shows no sign
of easing up. If anything, there are signs of this activity spreading across southern
Europe.
All
the revived interest in investing in Europe and forecast growth is driving up
the price – coupled with the shortage of acquisition opportunities – simply
assets are becoming over-priced. In a recent survey by PwC this was highlighted
with 48% agreeing that prime assets are over-priced.
This is prime assets, try being the secondary asset. Access
to capital in the regions is proving a big challenge for bringing forward much
needed development. If I think around Leeds you see a number of stalled
developments and from ongoing conversations in the market it does come down to
finance. There is some hope with a number of recent developments being
constructed speculatively. You move down to M1 and come to Doncaster and
Sheffield, both of which are behind there northern neighbour but again you are
seeing inward investment – recently a Sheffield development was kick started
with Chinese finance.
Potentially it comes down to some damn good marketing but
let’s be honest London is the capital but it’s not the centre of everything.
The North particularly have so much to offer in terms of excellence and
therefore marketing it correctly should lead to investment – okay that may mean
assets become over-priced but let’s worry about that later. You look at the
Advanced Manufacturing Park and Sheffield Business Park and see the hub being
created in Sheffield.
We started planning our local dinner for April this week
and it always excites me when discussing potential speakers – we’ve got a
really good one nearly confirmed now. If you want to be invited to drop me a
note, they tend to be very informal dinners with very good conversations on the
market place.
Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to
property and construction.
Hope you enjoyed the weekend
Lee
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