JLL’s property predictions 2017

Average property returns will be 4% amid broad stability in 2017, according to JLL’s annual property predictions. The firm announced its forecasts this morning, highlighting that despite uncertainty in UK politics, the economy will outperform most other developed nations. Alternatives are likely to be a focus for investors, with volumes expected to grow and some sectors seeing yield compression. Meanwhile, industrial assets will likely see the highest returns, the report said. Here is JLL’s full list of predictions:  UK economy and politics 2017 will bring no real clarity on the eventual Brexit deal The UK economy will grow less strongly than in recent years but will still outperform most other developed nations Rising inflation – and potentially, market interest rates – will be the main economic story of 2017, and may start to affect the Brexit debate Capital markets Total returns to remain positive with prime to outperform secondary Hong Kong and mainland Chinese capital will lead the charge in London Local authorities will continue to be active and private equity will make a comeback in the regional investment market UK funds and global institutions will return from a post-referendum pause Investors will accelerate their focus on alternative sectors Occupier Occupiers will be forced to adapt to uncertainty and volatility in 2017, with the outcome of Brexit the primary concern The sheer pace of change caused by technology will become more evident in real estate User experience will become an increasingly central part of real estate and workplace strategy in 2017 Sustainability Enlightened city and regional leaders will unlock commercial opportunities from the green economy Prudent landlords should act early on the minimum energy efficiency regulations Corporates and investors will focus on tackling inequality Offices Rents to come under pressure in London – but falls will be limited Contrasting sectorial mix and supply conditions will guide London submarket performance Public sector requirements from HMRC and the GPU will boost regional office take-up in 2017 Retail Retail sales will be under pressure as macroeconomic drivers bite Retailers will endure a “perfect storm” of rising inflation, labour costs, import costs and in some cases business rates and ongoing e-commerce-led structural change – but resilience will prevail Uncertainty for investors, but opportunities emerge Industrial Occupier demand will remain above the long-term average, with limited supply supporting rental growth despite the slowing UK economy Industrial will deliver the highest total investment return of the commercial sectors in 2017 Labour will become an even more central issue in 2017 Residential New-build starts will hold at just below 2016 levels across the UK as a whole, but will fall dramatically in London, where need is most acute 2017 will be the year in which innovation techniques begin to be used much more widely in residential construction Price growth will be subdued in London, with 0.5% increase forecast for the UK, rising to 1% in London – although the big regional cities may outperform Alternatives Volumes in the alternative sectors will continue to grow, with some sectors even seeing yield compression There will be an increase in the number of partnerships between operators and long-term funders There will be increased polarisation within the market in terms of asset quality Construction and development Construction growth will slow over 2017, with the public sector, infrastructure and housing offering potential bright spots Refurbishment will present opportunities for investors and occupiers Technological disruption will drive smart solutions to industry pressures. To send feedback, e-mail karl.tomusk@estatesgazette.com or tweet @ktomusk or @estatesgazette