In this report we look at how economic, political, and technological forces will affect property markets in 2019 and beyond. This report is the most comprehensive sector-by-sector outlook in the industry, from flexible office space to e-commerce, and from data centres to build-to-rent. There’s a comprehensive supplement on Brexit, and we once again look closely at how tech and innovation trends may affect real estate. For the first time, we also explore the growing ‘petrol and automotive’ real estate sector.
• A benign but gradually weakening global economic environment, with notable risks around trade and sovereign debt, with UK GDP growth in 2019 of 1.5%, only slightly stronger than 2018.
• Very turbulent UK politics arising from Brexit will continue well into 2019 causing hesitation and delay for businesses, consumers, and property markets. We hold to our ‘base case’ that the withdrawal deal, and a reasonably comprehensive free trade agreement, will eventually be signed. But we place a 40% probability on a ‘no deal’ outcome.
• Subdued consumer spending and business investment arising from a weak currency, inflation and Brexit uncertainty. Office-based employment growth will be slightly lower in 2019 than in 2018.
• 2018 has illustrated the resilience of the UK property investment market, particularly in the eyes of overseas investors. Investment volumes are likely to remain robust at around £65bn for 2019, delivering total returns of just under 3% per year over the next five years.
• Our sectoral picks continue to focus on the so-called ‘beds sectors’ (residential, student accommodation, hotels and healthcare).These sectors either exhibit non-cyclical characteristics or have very significant demand and supply mismatches.
- The retail sector will continue to polarise in 2019. We expect another difficult year for certain retail types as cyclical factors move to the fore – though both prime, experience-oriented and convenience retail will continue to exhibit resilience. Industrial and logistics property will outperform again but investors now need to be alert to consumer weakness, a surge in supply, and technological developments.