The Conservative Party’s win in last week’s General Election should boost the confidence of London office investors in the near-term, according to Royal Bank of Canada analyst Julian Livingston-Booth.
Livingston-Booth wrote in a note to clients that he expects “greater confidence” from investors and for landlords to be more bullish in lease negotiations, which could see rents rise.
However, the RBC analyst added that there remain “hurdles” to longer-term rises in the market, and the election result is unlikely to have much effect on occupier demand.
“Lease expiries continue to drive occupier demand for London office space,” he wrote. “However, GDP growth and Brexit are likely to be key to driving the growth in London office-based employment required for rent growth longer-term. We believe it is hard to argue at this stage that the General Election result improves the likely impact of either.
“Rents at or close to peak levels, a high cumulative level of development completions over the last four years and the trend in occupiers using space more efficiently are further headwinds to sustained growth in our view.”
Livingston-Booth sees little impact on other UK commercial property sub-sectors from the election.
“We believe UK retail and industrial property markets are unlikely to see as much of a near-term impact from the election, with structural headwinds and tailwinds respectively remaining dominant,” he wrote.
“Segro’s decision prior to the election to sell some warehouses for a price in line with their June valuation is consistent with our view that mid-sized distribution warehouses face the biggest challenges among favourable UK industrial property markets.”
To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette
