Although there are some signs of recovery in the UK's battered residential real estate market, rises arelikely to be muted by the shortage of credit and the challenging outlook for employment. In April 2009,mortgage approvals were still about one-third lower than they were in the same month of 2008 ' but weremarginally higher than in March 2009. Thanks to the government's 'kick-start' programme, housing startsbegan to rise in Q109.In London, the final impact of the global crisis on the financial services industry, which accounts forabout one-third of total office rental in terms of space (not including another third that is accounted for bybusiness services), is still unclear. Various researchers expect rentals to continue to fall into 2010.In spite of the comparative lack of importance of financial services in most UK cities outside London,rents for ' and take-up of ' office space is also falling in Edinburgh, Glasgow, Leeds and Manchester,and will likely continue to do so over the next year. The UK's major property investors have beendefensive. Companies have revised down the values of their portfolios, de-leveraged balanced sheets bydisposing of assets in the UK, focused on opportunities in other countries, and sought to boost fundsthrough major rights issues.We suggest the following are the key issues to monitor for the real-estate sector in the coming year or so:- Staffing levels in the financial services sector. Although the rate of retrenchments is reducing, it willmost likely continue over the coming months. This will negatively impact demand for high-qualityoffice space, especially in the City of London and the West End. Nevertheless, it is not unreasonableto expect that manning levels stabilise will in, or before, Q110. At that point, it will become clearerhow much office space is needed.- The absolute level of bank lending for mortgages and real-estate development. High equityrequirements for mortgage products currently exclude many first-home buyers, severely restrictingdemand. Our analysis suggests that lending will likely contract over the forecast period. However, theUK is a country in which a large percentage of total lending is now undertaken by newly nationalisedstate-owned commercial banks. The government is thus in a position to mandate lending.- The volume of transactions in the residential real-estate market. Regardless of the behaviour of prices,a pick-up in the volume of transactions would indicate that prices have fallen to market-clearinglevels. Most developments in the past few months ' such as the depreciation in pound sterling and thereduction in variable mortgage rates ' are consistent with greater affordability of UK housing toforeigners and locals alike.

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United Kingdom Real Estate Report Q3 2009
Published on July 2009
Report Summary
Although there are some signs of recovery in the UK's battered residential real estate market, rises are
likely to be muted by the shortage of credit and the challenging outlook for employment. In April 2009,
mortgage approvals were still about one-third lower than they were in the same month of 2008 ' but were
marginally higher than in March 2009. Thanks to the government's 'kick-start' programme, housing starts
began to rise in Q109.
In London, the final impact of the global crisis on the financial services industry, which accounts for
about one-third of total office rental in terms of space (not including another third that is accounted for by
business services), is still unclear. Various researchers expect rentals to continue to fall into 2010.
In spite of the comparative lack of importance of financial services in most UK cities outside London,
rents for ' and take-up of ' office space is also falling in Edinburgh, Glasgow, Leeds and Manchester,
and will likely continue to do so over the next year. The UK's major property investors have been
defensive. Companies have revised down the values of their portfolios, de-leveraged balanced sheets by
disposing of assets in the UK, focused on opportunities in other countries, and sought to boost funds
through major rights issues.
We suggest the following are the key issues to monitor for the real-estate sector in the coming year or so:
- Staffing levels in the financial services sector. Although the rate of retrenchments is reducing, it will
most likely continue over the coming months. This will negatively impact demand for high-quality
office space, especially in the City of London and the West End. Nevertheless, it is not unreasonable
to expect that manning levels stabilise will in, or before, Q110. At that point, it will become clearer
how much office space is needed.
- The absolute level of bank lending for mortgages and real-estate development. High equity
requirements for mortgage products currently exclude many first-home buyers, severely restricting
demand. Our analysis suggests that lending will likely contract over the forecast period. However, the
UK is a country in which a large percentage of total lending is now undertaken by newly nationalised
state-owned commercial banks. The government is thus in a position to mandate lending.
- The volume of transactions in the residential real-estate market. Regardless of the behaviour of prices,
a pick-up in the volume of transactions would indicate that prices have fallen to market-clearing
levels. Most developments in the past few months ' such as the depreciation in pound sterling and the
reduction in variable mortgage rates ' are consistent with greater affordability of UK housing to
foreigners and locals alike.
Table of Content
Executive Summary .5
Key Features Of This Report.....6
SWOT Analysis7
UK Real Estate/Construction Industry SWOT....... 7
UK Economic SWOT ........ 7
United Kingdom Real Estate Report Q3 2009 Page 1/5

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Real Estate Market Overview .....8
Office Rentals And The Troubled Financial Sector........ 8
Regional Centres And Industry .. 9
Investment, Development And Finance ........ 9
Residential .... 11
Key Projects...12
Construction Overview ... 12
New And Ongoing Commercial Construction..... 12
Major Projects....... 12
Table: UK Major Infrastructure ' Transport...... 12
Table: UK Major Infrastructure ' Utilities 14
Table: UK Major Infrastructure ' Construction. 15
Real Estate Investment Trusts In Q309.....17
Table: FTSE EPRA/NREIT Global Real Estate Index, Total Returns (US dollar terms) .... 18
Table: US REITs, Total Returns (US dollar terms)...... 19
Industry Finance Outlook........24
International Financing.. 24
Table: Client Loans, 2007-2013 (% change y-o-y) ...... 24
Table: Loan-Deposit Ratio, 2007-2013...... 26
Domestic Financing........ 27
Monetary Policy..... 28
Industry Forecast Scenario ......30
Table: Housing Prices At A Glance In Western Europe........ 30
Table: Office Rents In Western Europe, CBRE... 31
Table: Office Rents In Western Europe, Other Sources ........ 32
Construction . 33
Table: UK Construction Industry, 2005-2013..... 34
Macroeconomic Outlook. 35
Table: United Kingdom ' Economic Activity, 2006-2013..... 37
Business Environment ...38
Real Estate/Construction Business Environment Rating....... 38
Table: Europe Real Estate/Construction Business Environment Rating .. 38
The UK's RECBER 39
Project Finance Ratings . 40
Table: Design And Construction Rating .... 42
Table: Commissioning And Operating Rating .... 43
Table: Overall Project Finance Rating...... 44
Company Monitor...45
Bovis Lend Lease ... 45
Balfour Beatty........ 46
A&J Mucklow Group...... 47
Hammerson... 48
Land Securities ...... 49
British Land .. 50
SEGRO 51
BMI Forecast Modelling..52
How We Generate Our Industry Forecasts 52
Construction Industry ..... 52
Bank Lending 53
Real Estate/Construction Business Environment Rating....... 53
United Kingdom Real Estate Report Q3 2009 Page 2/5

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Table: Weighting Of Indicators ........ 54
Project Finance Ratings Indicators .. 57
Table: Design And Construction Phase ..... 57
Table: Commissioning And Operating Phase ' Commercial Construction ...... 58
Table: Commissioning And Operating Phase ' Energy And Utilities ...... 59
Table: Commissioning And Operating Phase ' Transport.... 60
Sources 61
United Kingdom Real Estate Report Q3 2009 Page 3/5

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