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There has been little overall change to the total amount of development activity in the City since summer 2007. Total activity (taking into account planning applications, consents and developments under construction) has risen by 5% over the last six months. However, space with planning permission has fallen away during this period by almost 7%. This fall has been offset by a further rise in space under construction (up 15%) and a 40% rise in new applications.

In 2009, total returns to property will be negative for the third year running. Colliers CRE is forecasting total returns of –15.5% for the calendar year as the transactional market remains muted. An anticipated pick-up in activity in 2010 will help to generate modest postitive returns of 7.1%.

The recently released August IPD index showed positive capital growth for the first time since June 2007. This came amid a significant upswing in market sentiment over the past few weeks, with derivatives pricing for 2009 total returns, in particular, improving markedly. Our new forecasts are for -7.3% total returns in 2009 and positive returns of 5.0% in 2010. However, we believe that the real story lies in the upcoming five year period, from 2010 to 2014, in which we expect to see renewed yield compression and, ultimately, a return to strong rental growth for all sectors as supply/demand dynamics effectively reverse. The result of these factors will be annualised total returns in double digits over the five year period. For investors willing to take a long term view, secondary assets will look increasingly good value as the yield differential between prime and secondary widens. Providing investors can manage their assets through the weak occupier markets over the next year or two, we believe there could be significant potential value to be unlocked for secondary assets.

There was a continued pick-up in prices this month despite a marginal dip in activity. Seasonally adjusted house prices rose by 0.9% over the month and are at the same level seen a year ago. In contrast mortgage approvals fell by 0.2% in August but remain 63% higher year on year.

The ‘Big Six’ office markets have been understandably characterised by weak take-up in the first half of 2009. Latterly, however, enquiries are picking up in many of these locations - often for small unit sizes. The consistent story in each of these markets is that very significant incentives are being offered by landlords. For more information on rental evidence and incentives, please contact our local offices.

The bulletin examines recent rental trends and forecasts across the retail, office and industrial sectors. However, we have placed a particular focus on the central London office market, where the property cycle is the strongest and movements in rental values are now particularly marked.

All of the major house price indices indicated increasing prices in September, further buoying the optimism to be found in the residential market. With low base rates, steady mortgage rates and limited quality stock around, it is little wonder that prices are being driven upwards by steady demand from home-buyers and investors. Surveyor confidence in prices over the next few months continues to rise, but they are also reporting a smaller balance of new enquiries from purchasers. Interestingly, auction activity remains strong for decent properties in good locations, but there are reports that the volume of distressed stock being brought to auction has fallen. It remains to be seen whether this will pick up in early 2010, but we continue to expect prices to drift in 2010 as other vendors bring stock to the market. We will continue to watch the market closely for any clear signs of weakness.

GVA Grimley is pleased to present this latest Thought Leadership report on urban regeneration. We would like to recognise input from PPS, a leading communications consultancy well known for their work in complex policy areas, into the report. At this time, regeneration is going through a very challenging phase. Physical regeneration has stalled, whilst social and economic regeneration has failed to address long-standing deprivation and equality issues, despite many success stories.

Our latest development pipeline report shows that despite the recession, grocery operators are looking to expand in Britain in 2010. In fact the grocery pipeline has increased to 36 million sq ft from 28 million sq ft in 2007. A number of developments in the grocery market are contributing to the current demand for space. New formats have been rolled out by ASDA, Morrisons and Waitrose and stores such as Booths (currently with 26 stores across Lancashire, Cumbria, Yorkshire and Cheshire) have begun to expand their portfolio along with Haldanes (mid-size chain in East and West Lothian), who are a new entry to the market. In addition some supermarkets are looking to roll-out bigger stores, for example Sainsbury's are proposing a 150,000 sq ft store in Colchester. This is 50,000 sq ft more than their previous largest requirements since dropping their Savacentre format. In contrast to the development in the grocery sector the research also shows that shopping centre construction is less than half of the 2007 level. Retail warehouse construction has also reduced - halving since the beginning of 2009.

Whilst the month-on-month growth in retail sales (value and volume) stalled in November, annual growth remains strong (even considering that the comparative period was in the midst of the financial crisis). Strong performance in the household goods sector again stands out - compared to performance since the onset of the recession - as consumers look to bring forward big ticket spend prior to the VAT rise in January. The outlook for 2010 remains unsure. One positive indicator of late is that rising unemployment appears to be slowing, and reports of over 3m unemployed now look overly pessimistic. Companies have cut costs and frozen recruitment rather than make the level of redundancies that were anticipated. This has impacted the younger age groups as many graduate recruitment programmes have been curtailed. Retailers whose ‘core customer’ fit this profile may struggle next year as this trend is set to continue. Total unemployment is currently around 8% whereas the rate for the 16 – 24 age group (not in full time education) is currently over 19% (see graphs below).

The latest retail sales figures from ONS show an annual rise in the volume of retail sales of 3.4%; the biggest annual increase since the onset of the recession. Despite the fact that the like-for-like period in 2008 was effected by the credit crisis, the figures are still strong considering the continuing pressures, most significantly rising unemployment, facing the consumer. Whilst the rise was driven by the clothing and footwear sector, the performance of household goods stores stands out. The latest figures for this sector show the first significant annual return since June 2008 (see chart below). A possible explanation for this is that spending is being brought forward before the VAT rise in January, and that the spending is being focused on big ticket items – those that will see the greatest increase in price post VAT rise.

One of the anomalies of the current recession is the relative performance of retail sales. The pattern of retail sales during the early 90s' recession suggest that households cut back on discretionary expenditure and maintained non-discretionary expenditure. This time around, the pattern is not as clear cut. The volume of retail sales rose by 2.1% year-on-year in August. By the 3-month rolling average measure (that smoothes out some of the monthly variation) retail sales rose by 2.7% compared with the same period a year earlier. The divergence in investor sentiment between prime/good secondary and secondary stock continues. The problems that the retail market has faced in terms of increasing voids, tenant administrations and falling rental values have been exacerbated in the secondary market.

The amount of floorspace in the retail warehouse park development pipeline continues to fall: it is now almost 40% down on the most recent peak figure recorded in September 2004.

While the government pledges on one hand to put food security and production at the top of its agenda, farmers are faced with the threat from the other of having to put more land into environmental schemes and a lack of assertive action to combat the ever-increasing menace of bovine TB. Meanwhile, pressure continues to build on the valuable tax reliefs available via the ownership of agricultural land, making it vital for landowners to ensure they minimise any potential tax liabilities on their estates.

As we head into the autumn, the latest indications suggest that the worst of the credit crunch is behind us in terms of the rural property markets. The value of farmland has increased strongly for the second consecutive quarter and the prime country house market appears to have bottomed out and is even rising in some areas. In this bulletin we reflect on the reasons behind this recovery and try to predict future trends. Commodity markets continue to frustrate or reassure depending on whether you are a livestock, arable or dairy producer, but most farmers will benefit from an increase in their Single Farm Payments following the pound’s slide against the euro. As ever, the taxman continues to nibble away at Agricultural Property Relief, but we can also report a welcome victory for the tax payer.