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2017 UK Commercial Property Sector to Experience Fall in Construction and Development Activity

on Thursday, 12 January 2017.

An annual forecast made by the real estate firm Savills has predicted that borrowers and lenders will become increasingly wary of the risks involved in investing in new projects in 2017 and beyond.

This will particularly be felt in the London property market, where Savills has predicted that up to half of planned developments could be delayed, but a 30-40% fall in development activity across all sectors and regions is also expected.

Such forecasts come as the effects of the Brexit vote felt across the UK continue to be mixed. The Federation of Master Builders for example has published research showing that "more than 70% of smaller building firms have experienced increased costs as a result of the weakened currency", and these are set to increase further. The rising costs of materials caused by the depreciation of sterling since the EU referendum represents challenges to builders and developers.

The fall in the value of the pound at the same time has boosted overseas investment in central London's office market, particularly by Asian investors. Savills has predicted that non-domestic investors will become increasingly active in the UK both inside and outside London within the next 5 years.

The forecast for 2017 therefore remains uncertain, and the unknowns surrounding the terms of the UK's exit from the EU may cause further concern for the commercial property market. Savills, however, still believes that investors will continue to favour the UK, especially as there is a "strong demand for properties including long-let offices in the City and index-linked warehouses", and other such traditional assets providing secure income streams which are somewhat protected from the effects of political and global events.


If you would like to discuss any matters relating to your Commercial Property needs, please contact Steven McGuigan in our Commercial Property Law Team on 0117 314 5442.