Which sectors of the market will be most active next year?
It appears there's a wall of money chasing the private rented sector (PRS) and we anticipate this sector will dominate the headlines as overseas and local institutional investors actively chase down suitable opportunities. The office sector will continue to be active, with large-scale occupiers having to pre-lease new buildings; in the city there are only three office buildings due for completion in 2019 and this will make it a very interesting year.
Have rents and yields peaked across the various asset classes?
There is no doubt we are at or near the top of the current cycle; the real question is how long it will last. The type of investor has changed, with investors with lower-cost capital now looking at our market.
Generally speaking, rents have probably peaked but, given the shortages of supply in the office market, it may be that there is some limited but probably not sustainable growth during 2019. Yields are holding stable, but the consensus is that any movement will be outward.
Where are the best investment opportunities at this stage?
As mentioned above, much of the focus will be on PRS. But, given the intensity of competition and a question mark over the sustainability of rents, along with the likelihood of further Government intervention, it may not prove the best-placed investment. For the brave, the retail market may provide better returns. The retail occupational markets are in a period of flux with UK operators under pressure. This has affected tenant demand with a knock-on effect to rents and yields.
There is a gradual realisation that a physical retail presence is required along with a virtual presence. For these reasons, it may be that well-located retail units where shoppers can get a fuller experience will prove to be a good bet.
One thing to watch out for in 2019?
The economy is now heavily reliant on international business, with the office sector almost dominated by North American entities. Similarly, a significant portion of property investment is from overseas investors. As a consequence, any international changes will have a huge impact on our market. Brexit is still unclear, and the Trump administration's policies towards US entities trading abroad is still evolving.
James Nugent is chairman of Lisney