Kingsturge - UK Property Forecast 2003
The UK economy grew by 1.7% in 2002, its lowest rate for a decade. The uncertainty caused by the slowing economy restricted tenant demand for commercial property. Despite this, the property market outperformed both equities and gilts in 2002. Kingsturge predict in 2003, the property market as a whole is will produce a total return of 8.3%, potentially above equities for the fourth consecutive year.
Economy:
- The projection for economic growth in 2003 has been revised downwards marginally to 2.3%.
- The manufacturing sector is expected to see growth of 0.8% in 2003, following a contraction in 2002.
- The forecast for employment growth has been revised upwards to 0.2%.
- Consumer expenditure is expected to slow to around 2.3% in 2003.
Offices:
- The rental value growth in the office sector, has now been revised downwards to -1.5%.
- Capital values are now expected to fall by -1.3% across the office market.
- The projected total return is expected to increase to around 5.7% in 2003.
Industrial:
- Rental value growth in the industrial market is expected to be around 1.4% in 2003.
- The capital growth in the industrial property is expected to 1.7% for 2003.
- The industrial market is expected to slow down during 2003, but produce a respectable return of 9.3%.
Retail:
- Following a strong performance in 2002, the retail market is projected to slow during 2003, ending the year with a return of 10%. The latest forecast indicates rental value growth of 2.5% in 2003 for all retail.
- The standard shop sub-sector is expected to see relatively low rental growth in 2003, compared with the other retail sub-sectors, as it did in 2002. The total return is projected to be around 9.4% in 2003.
- Shopping centres saw the highest rental growth during 2002 at 3.9%, but this growth is expected to slow to 2.6% this year. The projected total return for shopping centres remains a reasonable 9.7%.
- The retail warehouse sub-sector is forecast to see the strongest rental value growth of 3.3%, and highest total return of 10.9% in 2003.