Knight Frank’s 2016 predictions for Yorkshire’s office market
Tuesday 12th January 2016
Property consultancy Knight Frank’s chief economist, James Roberts, provides insights into what he thinks this year has in store for Yorkshire’s office market.
The commercial property market is ready for some landscape changes in 2016, with regional sub-sectors all being affected. We believe four key trends are set to permeate the Yorkshire office market.
One is greater availability of bank debt. As the Eurozone continues to pursue quantitative easing well into 2016, the UK might actually be raising rates next year, and the financial markets will price in the increase ahead of the event. This could result in a carry trade that sees UK banks flush with cash from the Eurozone seeking higher interest rates. In turn, the origination teams at the banks will come under pressure to put the new money to work. With growing evidence of rental growth, we believe that UK commercial property could be a beneficiary, should there be increased lending, which will feed through to the regions such as Yorkshire.
Typical buyer nationality is also set to change. Recent years have seen unprecedented levels of purchases in UK commercial property by overseas buyers and this will continue, but the proportion of buyers from emerging market nations such as China will ease due to the economic slowdown in that country. The rout in many commodity markets will also likely have a noticeable effect in 2016, leading to increased sales to repatriate profits. In contrast, with the US Dollar strong, the market could see far more investors from the US descend on areas across the UK in 2016.
Political threats to the market are likely to be a factor. Some of the threats to the wider UK economy could become heightened in 2016, causing a knock-on effect on commercial property and the office sub-sector. As we draw closer to the 2017 Brexit referendum, some overseas investors may become wary of investing the UK. If the polls are pointing to a close race in the referendum, it will impact demand for commercial property. There is also the threat that should the government fail to convince the financial markets that it is adequately addressing the deficit we could see a run on the pound.
The slow death of the office desk will continue. Ten years ago, ‘agile’ work areas in offices, like sofa areas, team space, and even games rooms, were the preserve of trendy advertising agencies and tech start-ups. In more conservative forms, agile work areas are becoming increasingly commonplace among firms from all industries when acquiring new offices in Yorkshire and across the UK. Companies are waking up to the benefits in communication, team spirit, and worker satisfaction, which a move away from the desk offers. Moreover, there are efficiency savings when a firm no longer allocates a desk for everyone, so we expect agile offices to continue their rise in 2016.
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