The worst of the property slump is over and global invested stock will grow by five per cent this year according to a new report.
DTZ’s annual Money into Property - which was presented to more than 130 property professionals at an event last week in Birmingham - predicted that UK invested stock is expected to rise by eight per cent per cent this year as capital values continue their recovery.
Based on its forecasts, the firm recommended that investors become pro-active buyers again and identified 151 out of 172 markets, or 90 per cent, across the globe as offering fair value this year.
This is in contrast to last year, where only one market – the London City office market – was identified as offering fair value. Of the 151 markets DTZ identifies as offering investors buying opportunities in 2010, eight are in the UK, 70 are in Continental Europe, 32 are in the US, and 41 are in Asia Pacific.
Of the eight UK markets, the prime London City office market is now considered to be the only ‘hot’ investment location in the UK. Another five prime office markets (Cardiff, Edinburgh, London’s West End, Newcastle and Nottingham), London West End retail and Heathrow industrial are classified as “warm” investment locations where investors can expect adequate returns.
Manchester, Leeds, Bristol and Birmingham are classified as “cold” investment locations where investors can expect below-adequate returns. In these markets, repricing in the investment market has got ahead of improvements in the occupier market.
As a result, DTZ viewed these markets as currently priced higher its analysis suggests it should be.
Geoff Thomas, regional chairman for the Midlands and South West at DTZ, said: “Whilst Birmingham has been identified as a market that is currently above fair value, this is only an average market view.
“Good, asset specific opportunities are available for investors, as witnessed by the high levels of activity in the latter part of last year. Recognised as a major, well-diversified office market, the city attracts interest from both domestic and overseas investors, with German funds being particularly active recently. The result has been an increase in office prices of almost 20 per cent over 2009.”
Martin Davis, head of UK Markets Research at DTZ, added: “What a difference a year makes. This time last year we recommended investors to wait on the sidelines as almost all commercial property markets worldwide were traded at prices above their fair value.
“This year, following a marked repricing of the market, our research shows that there has seldom been a better time to invest in prime commercial real estate.”
Overall, DTZ’s positive outlook is reinforced by its global Investor and Lender surveys which both reveal an increase in confidence for 2010 and 2011. Two-thirds of lenders are expecting to increase gross new lending in 2010 and 2011, and no respondents expect to reduce lending to the commercial real estate sector over this period. This is a marked improvement on sentiment last year when half the lenders expected that they will be decreasing gross lending volumes in 2010. DTZ’s Investor survey demonstrates rising confidence: 76 per cent expect to increase their own net investments into commercial real estate in 2010, rising to 94 per cent in 2011.