CBRE 2020: UK market will rebound when Brexit withdrawal agreement is achieved

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.

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%. However, with job creation slowing and continued uncertainty weighing on business investment, the UK economy is expected to be increasingly reliant on consumer spending.

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. In a reversal of the trend seen for most of the last 40 years, the least volatile mainstream sector for investors will be Central London offices, while the most volatile will be Retail. Further yield compression is expected across European office markets, with London looking particularly well-placed from a relative value perspective.

James Brounger – Regional Managing Director, CBRE South Central, explains:

“With the General Election now done and the first stage of Brexit approved by Parliament, the South Coast, in line with the UK, should see a more positive year in 2020.  Southampton is set for significant investment and development across the city, and the latest transport plans unveiled this week will dramatically transform transport across the county.

“The strategy, announced by Transport for the South East aims to support sustainable travel across the region, focusing on rail, bus, walking and cycling. The final strategy will be published in April 2020, with a strategic investment plan expected to be announced in 2021.”

Miles Gibson, Head of UK Research at CBRE, added:

“Whilst the outcome of the UK General Election ends a prolonged period of political uncertainty, it is important to remember that the bigger Brexit negotiation – concerning the UK’s long-term relationship with the EU – is still to come.  Even so, real estate investors and occupiers can expect 2020 to unlock fresh pockets of opportunity beyond the traditional real estate parameters as the ways in which we use the built environment continue to evolve. Global and domestic uncertainty means that the UK economy is likely to experience a slow start; but there are positive trends that will support growth, including a tight labour market, rising real wages and a fiscal boost.”

james.wallace@realassetmedia.com