Development Outlook Report Summer 2013

This bulletin examines changes in commercial and residential development activity and viability, new government initiatives and the overall effects on the outlook for new development.

As an addendum we examine some of these factors in more detail in three parts of the country, London and the south, the West Midlands, and Scotland, illustrating how these factors will affect land values.

Development activity

• Over the last 12 months new retail development has decreased, new office development has stabilised, new industrial development has increased slightly and residential development has increased more noticeably. There are marked regional variations with stronger development in London and its hinterland than elsewhere.

Development viability

• The economic outlook is improving but the upturn will be patchy. Slightly below trend economic growth should be achieved by 2015, with similar growth expected in 2016 and 2017.
   
• For commercial property there remains an increasing differential between prime and secondary rental/capital value growth and between London and the rest of the UK. Outside London prime capital values are generally static or increasing slightly, but secondary values are still falling.
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• Prime property leads the upturn as shortages of available space are starting to appear outside London, with significant rental increases expected in some locations in 2014. Capital value growth should be stronger due to some yield compression as investor demand improves outside London. As in recent years central London retail and office values will increase the most, but the gap between growth rates with the rest of the country should gradually narrow.