European Public Real Estate Association Philip Charls, chief executive
There is a solid tier of global cities – London, Paris and Berlin – which have their own dynamics. If the UK economy continues to grow, the provincial cities may also offer value. The same can be said for other parts of Europe, such as Hamburg, Frankfurt and Munich in Germany.
Meanwhile, Switzerland and the Nordics will hold their own at a conservative and more predictable pace. The Netherlands is also looking more upbeat, with a possible turnaround in effect.
Now the new set of MEPs are fully active in Brussels, we have been busy meeting with them to support their understanding of the wider real estate sector. Sustainability is high on their agenda and our current focus is on the new ELTIF regulation, ensuring that commercial real estate is classed as an eligible asset.
With our relationship with the FTSE firmly in place, we see the global EPRA indices and research capability well established. We will continue to leverage this to the benefit of our members, pursuing our programme of global investor outreach and bringing the message of European listed real estate to non-European investors.
This is greatly assisted by our achievements in encouraging reporting transparency across the European listed sector. We will continue this push for consistent reporting using our updated best practice recommendations and sustainability reporting metrics.
Association of Real Estate Funds John Cartwright, chief executive
The Association of Real Estate Funds hopes to persuade the government to bring forward the introduction of stamp duty relief for transferring assets into property authorised investment funds.
The relief was announced by George Osborne in the Autumn Statement, but is not due to take effect until 2016.
Under current stamp duty land tax rules, when a PAIF is launched by transferring existing property portfolios as seed assets, it incurs 4% tax. Aref wants the removal of double PAIF taxation to be brought forward to 2015, so that managers can launch PAIFs sooner.
The association will also be engaging with investment platform services to ensure they have made the necessary systems change to support the income streaming required.
Lodestone Capital Rebecca Worthington, chief executive
This will be a year of continuing momentum for UK commercial property, with strong capital inflows, low interest rates and banks lending on more aggressive terms. LTVs will be higher and margins very competitive.
There will be a strong uptick in regional centres, yield contraction and more M&A activity.
It is difficult to see 2015 returns reaching the heights of the past year, but the market will continue to benefit from the weaker appeal of other investment choices.
CBRE Global Investors Andrew Angeli, head of UK research
Conditions are ripe for another strong year. But it is very difficult to see yield compression as pronounced as previously, and 2015 will be a rental story.
While there has been rental growth in some segments, it will broaden most obviously to regional office properties. Grade-A properties in good locations with blue-chip clients should deliver in Manchester, Leeds and Birmingham. Edinburgh also looks attractive.
The industrials recovery, which is already a national story, is also strengthening.
Meanwhile, central London should enjoy another good year.
However, CBRE is cautious on Aberdeen – following recent falls in the oil price – and long-lease supermarket space.
British Property Federation Ion Fletcher, director of policy (finance)
Whatever its political hue after the general election, the hope is the government will continue to consult openly.
The planning regime remains too complicated, and progress will hopefully be made on the business rates review. Meanwhile, moves towards regional devolution could be a boon for the development industry.
The supply of debt finance to UK commercial property should continue to improve, particularly for assets outside London and for speculative development.
In the Bank of England’s continuing consultation on setting up a commercial property loan database, the BPF will be pushing for proportionate and sensible data requirements.
Separately, the BPF will also be highlighting concerns about potential double taxation of property investment funds that could result from the OECD’s Base Erosion and Profit Shifting initiative.
Hermes Real Estate Chris Taylor, chief executive
After two years of very high returns, it is almost inevitable that returns this year will disappoint. There is sufficient investor momentum to compress yields a bit further, but they are expected to gradually retreat again as we move through a normalised interest rate cycle.
We still see value in segments of the UK where rental growth has returned. Urban resurgence and growth are driving new opportunities here and in the US.
Emerging “urban village” locations are capturing demand from some occupational markets. Urban living and leisure uses are increasing as urban submarkets reinvent themselves, often supported by new infrastructure, providing opportunities with growth prospects in an otherwise low-growth environment.
Commercial Real Estate Finance Council Europe Peter Cosmetatos, chief executive
Political uncertainty is a key concern, with the forthcoming general election in the UK and worries that confidence among international investors could take a hit.
Pressure on lending margins will level off and, while the possibility of a correction cannot be ruled out, the market should remain stable overall.
Gradually increasing interest rates will help push up rents, and debt funds and other non-bank lenders will remain active.
Consultation on the development of an industry loan database will continue, while “slotting” criteria for bank lending may face change following the expected publication of a new draft standard from the European Banking Authority.
Standard Life David Paine, head of real estate investments
In 2015 we expect income growth to be the main driver of investor returns in markets across the US and the UK, while in the eurozone we expect yield compression to be the key driver of returns.
However, there will continue to be political uncertainty, which will require investors to remain vigilant and selective.
For many markets, we see the demand dynamics of 2014 continuing into this year. The prediction for business investment spend is critical and strongest in the US and UK, hence we expect more upward pressure on rents in those markets.
Activity in the logistics and manufacturing sectors has picked up sharply in the UK this year and we believe this will persist in 2015.
The supply outlook in 2015 will change. Construction activity is gathering momentum in London and some US REITs are unable to source stock at acceptable yields, which will encourage new developments in some of the gateway markets.
The combination of an extremely competitive lending market in the UK, historically low development activity in the past five years and high volumes of equity chasing real estate investment, suggests there will be renewed enthusiasm for development in 2015. We will be watching supply carefully as it will impact later in our forecast period.
