THE ECONOMY
A slower start to 2020 but GDP growth will gain momentum after Q2. With job creation slowing and uncertainty weighing down business investment, the UK economy will be increasingly reliant on consumer spending and increases in productivity to support economic growth. That said, despite the negatives (Brexit uncertainty, and international risks) there are some positives (labour market, rising real wages, and a fiscal boost) providing support to growth.
INVESTMENT
UK total returns are solid, and a low interest rate environment offers investors a robust alternative to fixed income. Investment volumes will rebound sharply from 2020. Despite already being at historic lows, further yield compression is possible if not likely across European office markets, with London looking particularly well-placed from a relative value perspective.
REAL ESTATE SECTORS
In this section, CBRE examines the key specific issues likely to affect the main UK real estate sectors in 2020. From strong growth in multifamily and logistics real estate, to a radical restructuring in the retail sector, 2020 promises to be anything but boring.
POLITICS
UK politics will again be dominated by Brexit in 2020. Assuming a negotiated withdrawal deal is confirmed soon (our base case), attention will turn to the equally controversial future relationship and consequential questions such as Scottish independence. However the most important political event of 2020 for the UK is arguably the US Presidential election.
CLIMATE CHANGE
Investors and developers can take steps in the coming year towards making real estate a carbon neutral industry. Careful analysis and assessment of building performance can help to identify savings. To maximise these savings developers will need to adopt a holistic approach, considering the design, construction and use of buildings, including use of materials. Growing pressure from within the real estate industry will come from employees and activist individual investors looking for ‘ethical’ returns.
TECHNOLOGY
In 2020, the UK Real Estate community will become more sophisticated with their technology strategies. These matured a lot in 2019, but there will be a divergence between ‘the best’ and ‘the rest’ as larger firms take bolder steps than smaller firms can manage. To help manage this, stakeholder groups will increasingly articulate their tech requirements into three more manageable and distinct activities; analytics, management and experience.
CBRE’s annual UK Market Outlook report takes a comprehensive look at the prospects for real estate in the year ahead. We cover the economic backdrop, the investment outlook, and we examine the prospects for each of the main real estate sectors. In this year’s Outlook document we also take a more focused look at three of the big drivers of real estate trends in 2020 – politics, climate change and technology.