CBRE expects ‘clouds to break’ for real estate by end of 2023

Next year is likely to be tough for the UK real estate market, but the team at CBRE is confident that the worst will have passed by its end. The agency’s UK Real Estate Market Outlook 2023 predicts a moderate recession will ease by the end of 2023, but that the market will face high inflation and rising interest rates for much of the year, with income returns driving returns rather than capital growth. Head of UK research Jennet Siebrits said: “While we forecast investment volumes will drop somewhat, the UK real estate market benefits from a diverse investor base. The realignment of prices towards the end of 2022 means that 2023 may provide opportunities for private capital to enter the UK market.” Siebrits added: “We face an undoubtably challenging start to 2023, but the clouds will begin to break later in the year. Logistics and purpose-built student accommodation sectors have robust rental growth prospects and the life sciences, build-to-rent and healthcare sectors have strong fundamentals that remain attractive to investors.” The agency expects leasing activity in the office market to be “constrained” by falling office-based employment, but for demand for the best properties to remain high. Yields are likely to expand, the team said, with prices stabilising, Investment volumes are expected to fall by a fifth year-on-year. In logistics, CBRE expects take-up to remain strong and for rental growth to attract buyers, while in residential, build-to-rent and co-living demand will be buoyant. Retail will be “less affected by repricing than other sectors”, the agency said, but “will not be immune to the wider economic headwinds”. The team predicts the number of business casualties “to be less severe than during the pandemic”. Turning to more alternative investment types, the firm said demand for data centres “remains near all-time highs” and said the life sciences sector will benefit from “government ambitions to make the UK a ‘Science Superpower’ by 2030”. To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Image © London From The Rooftops/Bav Media/Shutterstock