IN THE midst of the economic doom and gloom that has afflicted the commercial property sector, CB Richard Ellis has produced an eight-page document on what it calls The Case for UK Property.
That case is made out to be a strong one, with CBRE stressing that, over the next 12 months, investors will have the opportunity to acquire good-quality property assets offering the highest real income returns for many years, which it says is a bonus
from current market conditions.
The CBRE paper is one of a flurry of documents on market prospects from various agents, never hesitating to be frank about the situation but also highlighting any silver linings they can find.
That might be deemed talking the market up, but many seasoned property experts believe there is not enough of it.
The CBRE document says property buyers this year will range from the so-called opportunity funds through to institutional investors and sovereign wealth funds of diverse international origin.
It says there is continuing strong interest in international diversification in property portfolios, evidenced by North American institutions, German open-ended and institutional funds and sovereign wealth funds.
Peter Damesick, CBRE's head of UK research, states: "In current circumstances this will favour the UK in light of the fall in sterling and extent of repricing that has already occurred compared with other markets.
"The UK market, having been the first and fastest to respond to the financial crisis, is now therefore seen as likely to be the first to bottom out.
"Investor demand will be selective with good-quality, well-let stock with longish income streams looking to be most attractive. Investor appetite for risk remains limited, so that lesser quality assets with shorter income streams will find it harder to attract buyers without some further price adjustment."
Knight Frank says prime office rents will be maintained or will even rise in some Scottish cities and there is also likely to be an increase in incentives to attract buyers and tenants.
Drew Oswald, Glasgow-based managing partner, said: "It has been encouraging to see prime headline rents hold firm across Scotland, especially throughout the difficult economic conditions experienced by the UK commercial property sector last year. Once again Aberdeen has continued to assert its top position against other UK markets for the second year running.
"There are still questions to be asked over when the real effects of the economic downturn will be fully felt in Scotland and there is no doubt that the occupier market has weakened over the last year. As a result of the slowing commercial property market, there has been an increase in incentives and this will continue throughout 2009."
Claire Higgins, head of commercial research, added: "A few key cities bucked the trend last year either by seeing exceptional take-up in the early part of 2008 or by seeing rental growth even in the last quarter. However, the overall picture is one of a gradually weakening occupier market as the recession fully takes hold.
"Many cities may see prime headline rents protected and the outward movement in prime yields begin to slow. Secondary property will be where the pinch is really felt in the year ahead."
And King Sturge believes there are unprecedented opportunities in the office property market.
In its latest research report, it points to a number of positives, including the outlook for cities across the UK, with rental reductions expected to be much less severe and the cities continuing to enjoy a less volatile rental cycle than London and the south-east of England.
