41


In short, the survey confirms a general optimism in the UK about the strength of the UK market. Given that property markets are cyclical along with the level of prices and yield compression seen over the 10 months of 2014, it might seem prudent to begin to think in terms of a possible slowdown or the beginnings of a price correction. The survey, though, shows that 63% of investors expect investment conditions to improve further. Only the US has a stronger response, with 65% expecting improvement.


In the UK, this may reflect the general expectation of strengthening occupier markets and rental growth. Nevertheless, yield shift driven capital growth is likely to be less pronounced in 2015 and total returns will moderate. Another possible interpretation of this bullish sentiment in the UK may be linked to the UK’s much delayed development cycle. The development pipeline has been turned off so completely for so long that there are severe shortages of high quality space across most asset classes.


As noted above, the survey shows that 42% of UK-based investors are targeting development. This might suggest that when the current investment cycle begins to lose steam, that the arrival of a new generation of institutional grade product may breathe a second and decisive breath into the UK investment market. If this were not enough, then the growing medium-term likelihood of large-scale Asian investment into UK infrastructure projects, such as high-speed rail links HS2 and HS3, or new port developments, such as the recent commitment at Liverpool, are sufficient to spin-off substantial real estate opportunities for years to come.


Risk appetite is likely to moderate in the next 12 months, after a significant increase in the last year || Tony Horrell


2015 GLOBAL INVESTMENT SENTIMENT REPORT COLLIERS INTERNATIONAL


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