If you have watched or read the news in recent weeks you would be forgiven for thinking that the world has come to an end.
The short response to that is: No, it hasn’t!
From a property point of view, of course, there has been a shift in yields and that was absolutely inevitable with interest rates rising (both borrowing and benchmark gilt rates) in a bid to curb inflation followed by the market jitters over the so-called ‘mini-budget’.
Not only has it affected borrowing, it has damaged sentiment too. You only had to pick up the Sunday Times at the weekend to see it has been a very difficult few weeks for REITs and unit trusts where redemptions have been high although it would be silly to put a percentage figure on by how much, because it will be out of date by the time you publish.
But when it comes to the occupier-led commercial property market, deals are being done and that is down to the fact that there is still good demand. Has the froth come off some of the prices? Possibly and, if you ask me, I would suggest that the market had probably peaked anyway.
In my view, there is still too much sub-standard retail across the board but this was true before recent events and before Covid so a correction was always coming in that sector.
But there is still strength in the ‘sheds, beds and meds’ market. The industrial and logistics sector is holding up well but, as I mentioned before, it might be at the cost of some of the froth that had started to be added to prices.
There is no let up, as I can see, in the life sciences market and, in areas where they are appropriate and successful, private rented sector (PRS) new-builds are performing extremely well.
I was involved in a PRS deal in Birmingham and the scheme was almost fully let just weeks after practical completion. Is this because occupiers have been put off getting a mortgage? Maybe.
The office market is still waiting to normalise after the height of Covid, with still no real sense of what the exact future of working from home is going to look like. On that note, serviced offices appear to be performing very well and there is a genuine “flight to quality”.
To go back to my opening line, from a property point of view, the world hasn’t ended – just as it didn’t with Covid lockdowns. That is not to say it hasn’t changed and that there won’t be further structural shifts but the market evolves with the changing needs of the economy and society.
I could give examples of convenience stores, roadside outlets and EV charging areas that have and continue to see growth and will continue to do so as habits change.
Interest rates will rise further (I can’t say by how much because I wouldn’t be a surveyor if I knew the answer!) and inflation will start to fall although prices will remain high – they just won’t be rising by as much.
This undoubtedly will lead to a period of adjustment starting with a large amount of watch and wait (you can’t be criticised for not buying at the moment). The real test will be seeing who is sufficiently stressed to sell quickly and cheaply.
And the property market will go on…