Savills suggest UK commercial investment strategies for 2015

Investors who are looking for the highest returns will continue to look for development opportunities, and Savills particularly favour outer London and the key regional cities as development opportunities in 2015.

Speculative development activity will remain sparse, due to investor and lender caution, but those who are brave enough to undertake it will do well, it said.

Overall Savills expect that 2015 will be another strong year for UK real estate, but investors are going to have to work harder to identify markets and sectors that will deliver high returns.

"The commercial markets in 2015 will still offer opportunities for both risk-averse and risk-embracing investors, though the stronger than expected bounce in capital values in 2014 will diminish," the report said.

In London offices, the low level of availability will continue to deliver strong rental growth.

"We expect to see continuing strong demand from risk-averse international investors," said the report.

"Strong capital value growth was undoubtedly the key theme of 2014, with growth across all sectors stronger than we were forecasting at the beginning of the year.

"We expect to see continuing capital value growth across all prime sectors in 2015, albeit at a slower rate.

"The general election in spring 2015 will definitely have some effect on sentiment, though in the agricultural and commercial sectors we expect the effects to be relatively muted."

In the residential markets the threat of mansion tax, combined with the Mortgage Market Review could lead to a more sustained hiatus in capital value growth in 2015.

Generally Savills expect that the macro- economic story for the UK will remain benign, with base rates remaining unchanged until early 2016, and the combination of low oil prices and recovering incomes giving a boost to the UK consumer.

Savills expect that UK real estate will continue to deliver high returns in comparison to other asset classes.

"This will mean that domestic and international demand for prime and good secondary assets will be strong, though we expect to see more focus on supply and demand fundamentals in 2015, rather than just the potential for yield shift."

Savills top picks across all sectors are for markets with structural or impending undersupply.

Click to open in new window:

Source: Savills