Following April’s new sobriety in expectations, market makers seem to be having trouble gaining ‘traction’ according to Colliers International’s latest Property Snapshot.  The economy is stalling, there is talk of further quantitative easing, and new opportunistic property stock coming to market is accompanied with only limited hope of finding debt to support such sales.

The key findings were:

• Increasingly sober UK economic views are impacting interest rate and base rate expectations. Inflation expectations are weakening and the likelihood of further quantitative easing before year end in increasing.
   
• More receiver stock is on the market, especially shopping centres. Institutions are active, but prime remains the main target, although properties with asset management angles are attracting interest.
   
• Retailers continue to face difficult trading conditions and tight margins. Until the VAT increase has worked its way through the system, and input price inflation eases, retailers will continue struggle.
   
• The West End continues to see considerable rental pressure, especially in non-core areas, due to lack of large Grade-A floorplates in the core. The City office market is less pressured, but new space continues to be ‘mopped up’. Regional markets are sluggish.
   
• Industrial Sector indicators are positive, but leasing demand is weak as businesses hesitate to expand, especially retailers with weak profit expectations.
   
• UK house prices remain very sensitive to interest rate levels, mortgage availability and wage growth. Further price declines are expected in 2011.

 Dr. Walter Boettcher, Director, Research and Forecasting at Colliers International commented:

 “‘Lack of traction’ sums up the state of the economy and property markets at the moment.

“The economic recovery is not finding traction, hence markets have a more benign view of inflation and have pushed back base rate rise expectations into 2012.  Gilts have fallen considerably. 

“In the commercial property realm, there appears to be something of a surge in secondary stock coming to market, although the question of ‘traction’ rises again here, as there are few signs of debt availability for acquisition of prime, let alone distressed secondary assets.  It will be very interesting to see how this plays out over the next month and whether cash buyers step forward.”