Waves of political and economic uncertainty have become something of a norm for markets in recent years. Against a backdrop of significant events – from US-China trade tension to Brexit – investors are taking extra caution with their asset allocation. We’re also seeing volatility creep back into markets as central banks reassess their supportive monetary policy.
The macro-environment has affected sentiment towards most asset classes, notably equities, bonds and commercial property. Against this backdrop though, UK commercial property remains a desirable investment that is attractively valued relative to other key asset classes.
In the face of this uncertainty, UK commercial property has stayed the course well.
A range of factors contribute to this resilience, including the current supply-demand dynamics in London. The constrained supply of offices in the capital against a high demand for office space is unlikely to shift and this continues to attract investors. By comparison, there is a perception that commercial property in the key cities in mainland Europe, such as Paris and Frankfurt, are fully priced.
There is also strong demand in the regions, which have seen an increase in inward investment as development in major regional cities continues.
In recent years, the weaker pound, affected by Brexit uncertainty, is another factor that has attracted overseas investors to UK real estate.
So how does the commercial property outlook compare with that of equities and bonds?
Firstly, UK commercial property can be a compelling long-term investment opportunity amid returning volatility in equity markets.