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‘Central London offices will outperform this year’

David Inskip, Head of UK Strategy & Research, CBRE Global Investors

London offices will benefit from the end of political uncertainty over Brexit and will see good demand and rental growth in 2020, David Inskip, Head of UK Strategy & Research, CBRE Global Investors, told The Real Estate Day. 

‘We look for pockets of outperformance and I would say that central London offices is the number one candidate in that regard,’ he said. ‘We have seen big improvement in the occupier market through 2019 and we expect that strength to continue into 2020. What was missing was investor sentiment, activity and pricing because of all the political uncertainty holding the market back’.

Now that the Brexit issue has been resolved things will change quickly, Inskip said: ‘It will mean that you get a bit of a re-pricing and a bit of yield compression coming through in the sector and a bit of outperformance as a consequence’.

The UK market will benefit from a stable Government and more political certainty, but there are still question marks over the country’s exit from the EU, he said: ‘Uncertainty will diminish but will not be completely eliminated. We want to move on quickly, but Brexit is a long process rather than just an event, so we will have to continue dealing with it and wondering whether the UK and the EU will reach a comprehensive trade agreement’.

The risk of a no-deal and the UK reverting to WTO rules would be damaging to the economy, but fortunately it is not the most likely scenario. ‘We think there will be a limited agreement at least and other things will be rolled over so that risk will be averted,’ Inskip said.

The UK has a number of things in its favour, like a strong labour market, good earnings growth and consumer confidence and the likelihood of higher government spending and fiscal policy providing a boost rather than being a drag.

In the real estate market 2020 is likely to be a year of ‘evolution of the trends we have seen recently rather than a year of sharp change,’ he said. ‘Putting retail to one side, generally in the occupier markets we strength, robust if not spectacular demand meeting fairly limited supply and that’s leading to modest rental growth, so it is a good story’. 

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