Specialist sectors still limited by stagnant economy
The latest specialist sector snapshot from Colliers International shows that the UK economy remains stagnant and consumers continue to save and deleverage household balance sheets.
Discretionary spending and specialist sector performance will continue to be impacted.
The key findings were:
Automotive and roadside – The dealer market is oversupplied given current sales volumes. Opportunities are increasing, but are mostly linked to poor quality and less favourably located sites. Investment yields and rents are static.
Recreational - The sector continues to trade well, supported by weak sterling and major sporting events. No major corporate failures have been recently announced and banks continue to support the sector.
Healthcare - Long-term residential healthcare continues to be buffeted by government policy and austerity. Tough trading conditions, ongoing issues of over-indebtedness and lack of clear government policy continue to affect investor sentiment negatively.
Hotels - Activity in the next six months will depend on the banks. Debt reduction will define hotels’ growth potential and the general economic conditions will determine trading performance which in turn will have a material effect on values and investment activity.
Licensed and leisure - Managed pubs and food-led businesses are generally performing well and are attractive to investors. The tenanted sector is still evolving to a new sustainable model and lack of debt in the sector remains a brake on deals
Rahim Jiwani, property economist at Colliers International, says: “The UK officially entered a double-dip recession in Q1 12, impacting consumer confidence. The household saving ratio fell slightly to 6.4 per cent at the end of Q1 12 from 6.9 per cent in Q4 11, but is still well above the 10-year average of 4.3 per cent. Real disposable income growth in Q1 12 is -0.1 per cent y/y, the sixth consecutive quarter of negative annual growth. Nevertheless, with inflation falling rapidly, trends in real disposable income growth should improve, along with confidence.”
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