CBRE: UK real estate expected to rebound in 2020 despite ongoing political uncertainty

The real estate sector should gain momentum in 2020 after a Brexit withdrawal agreement is reached, according to CBRE’s UK Real Estate Market Outlook 2020.

CBRE: UK real estate expected to rebound in 2020 despite ongoing political uncertainty

Miller Mathieson, managing director Scotland, CBRE

CBRE forecasts that the UK economy will have a slow start to 2020, before picking up in Q2. It forecasts continued real earnings growth, due to record labour participation and unemployment below 4%.

With the low-interest-rate environment set to continue, CBRE anticipates UK real estate will offer attractive and solid returns for investors. Across all property, CBRE expects total returns of 4% per annum between 2020 to 2024. Investment volumes should rebound sharply if a Brexit withdrawal agreement is achieved, as now seems very likely.



Several sectors are predicted to outperform across the UK and generate new opportunities for investors and occupiers. After exceeding expectations in 2019, office occupier markets are likely to continue to perform well across the UK next year, with corporate occupiers increasingly using real estate as part of their recruitment and retention strategy.

Office-based employment, which has grown rapidly over the past two years, is set to continue to expand in 2020, albeit at a more moderate rate. The war for talent will drive the occupational markets, with increasing demand for new, high-quality space. Given the supply of such space remains low, further rental growth is predicted in 2020.

The industrials and logistics sector is set to remain resilient, on the back of steady demand for logistics space and the sustained growth of e-commerce. Industrials and logistics rents are expected to continue to outperform other sectors. Next year could also see the first multifamily assets trade hands in the UK, rather than the high volume of forward-funding transactions seen in the market up until now.

With developments set to spread throughout the UK, CBRE predicts investment in multifamily will increase by 30% in 2020.



In the retail sector, CBRE expects a continuation of the current challenging environment from a combination of structural (changing consumer spending preferences and the growth of e-commerce) and cyclical (wage growth above inflation and EU workforce shortages) factors.

However, CBRE expects retailers who redevelop and reposition excess retail space for alternative uses to survive and thrive in 2020. Health and beauty will continue to benefit from increasing consumer interest in wellbeing, while the food and grocery sector will perform well as convenience remains the top driver for consumers.

Operational real estate, including student accommodation, healthcare, leisure, hotels and petroleum and automotive, is set to be a major growth area in 2020, with an increasing volume of deals in the sector and the emergence of specialist and core funds, with a greater allocation of institutional capital into operational real estate.

Drivers include the continued slowing of the traditional real estate sectors, the shift in focus to non-core markets as balancing real estate capital in core markets remains challenging, and the decline in lease lengths and capital growth through rent reviews. CBRE expects the trend of the ‘hotelification’ of real estate to continue in 2020, as property investors align with best-in-class operating partners to drive volume and pricing.



Miller Mathieson, managing director Scotland, CBRE, said: “While political uncertainty will persist throughout 2020 as we negotiate our future trade relationship with the EU, we expect to see a rebound in investment volumes across Scotland and the rest of the UK. The underlying property fundamentals in Scotland’s biggest cities remain strong especially across the office, industrial and operational real estate sectors. Climate change is now a major focus of the property industry and there is no doubt that investors, developers and occupiers will prioritise this issue in 2020 and beyond.”


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