Property Outlook and a new Local Authority Investment Landscape

CBRE hosted its annual property market insight briefing at DoubleTree by Hilton to occupiers, investors and local businesses. Keynote speaker, George Richards from CBRE’s Capital Advisors gave a talk on the on the changing landscape of local authority investment. CBRE UK Research Director, Andrew Marston gave an overview on the latest political and economic backdrop following last month’s General Election and in the context of the ongoing Brexit negotiation process. Mark Bradbury, Head of Capital Assets at Southampton City Council also spoke on the Council’s current portfolio and long term investment strategy.

CBRE’s recent local authority research showed that investment volumes increased dramatically in 2016 – 82 acquisitions totalling £1.3bn. And in the first three months of this year, a further 15 deals were completed valued at £300m. More than 60 local authorities have made at least one investment since the beginning of last year, including both Portsmouth and Southampton City Councils who completed four and three deals respectively at total values of £78m and £28m.

George Richards highlighted that local councils are now using long-term debt to invest in long-income commercial real estate to help broaden their income base and increase their financial independence from Government grants.

Over the medium term, councils should find this new property debt manageable, but it is not without long-term risk – to the national debt, to individual council income streams, and potentially to the liquidity of the commercial property market. While, the larger and more experienced councils will be able to take these investments in their stride, smaller councils may struggle a little, as they will be most exposed to specific risk.

James Brounger- Regional Managing Director, CBRE South Central
Over the last few years our market insight briefing has gathered momentum and once again attendance was high. George Richards’ review of the Local Authority investment landscape gave our guests a detailed insight into the drivers behind the recent sharp increase in scale of local authority investment, how it is being funded, and whether this new 'investor' is here to stay
James Brounger- Regional Managing Director, CBRE South Central
We already have a well-established portfolio which includes some 20,000 property assets and over the last 18 months have taken a more proactive approach to asset management. We have been particularly active in using our assets in the city centre to bring forward major regeneration schemes.

“In line with our investment strategy to maintain a balanced portfolio, recent acquisitions have included assets within our region as well as in other parts of the country and across a number of sectors.
Mark Bradbury, Head of Capital Assets Southampton City Council

Andrew Marston gave an overview of the current property trends, both in London and more widely across the regions. Looking specifically at Southampton, the office take-up for 2016 was 11% ahead of the five-year average and the first of half of 2017 saw take-up grow further, recording a 26% increase over the H1 average giving a more consistent pattern quarter on quarter.

UK economic performance looks OK and while GDP growth may be a little lower than the 1.8% recorded in 2016, unemployment continues to reduce, sitting at 4.6% for the three months to April. Inflation is rising, with a peak of 2.7% expected later this year before it levels off in 2019 at around 1.9%.