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Economic and property outlook (2011)
The document summarizes the current economic and property outlook for the UK and Birmingham region. It finds that the UK economic recovery has been weaker than expected, with output stagnating and inflation rising. Government spending cuts have also slowed the recovery. While employment is slowly improving, rebalancing the economy away from consumer demand to investment and exports is not happening quickly. For the Birmingham region specifically, GDP and employment growth have lagged the national levels but are also recovering gradually. Rental growth for offices, retail and logistics properties in Birmingham is expected to be modest in the near future.
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Economic and property outlook (2011)
- 1. Economic and PropertyOutlook Jones Lang LaSalle Summer Market Briefing Grant Fitzner Birmingham, 7 June 2011
- 2. 2 Overview • Output stagnates •Inflation alarms • Bank of England holds fire • Fiscal consolidation under attack • Rebalancing is the key… • …but is it happening?
- 3.
- 4. 4 UK recovery weakerthan expected… Source: National Statistics, May 2011 -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 UK GDP q-o-q, %
- 5. 5 …higher taxes andpublic spending cuts don’t help Source: Comprehensive Spending Review, October 2010 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 Communities Local Government Justice Home Office Transport Defence Health International Development Total Cummulative real growth %, 2010/11-2014/15 Cuts in Current Spending by Department
- 6. 6 -4% -2% 0% 2% 4% 6% 8% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Consumer Spending RetailSales Rebalancing away from consumer demand is key… Source: Oxford Economics Forecast
- 7. 7 …but progress isslow so far Source: National Statistics -1.2 -1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 2003-08 2008-09 2010- Consumer and government spending Investment and net exports GDP %qoq Contribution to quarterly GDP growth
- 8. 8 Slowly improving joboutlook… Source: Oxford Economics -3% -2% -1% 0% 1% 2% 3% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 -1% 1% 3% 5% 7% 9% 11% Total Employment (LHS) ILO Unemployment Rate (RHS) Forecast
- 9. 9 0.8 0.1 2.2 4.3 3.1 2.9 3.3 3.6 3.5 3.9 2.5 2.1 2.83.0 2.2 2.8 2.7 -0.1 -4.9 1.3 1.8 2.5 3.0 3.0 2.8 -1.4 -6% -4% -2% 0% 2% 4% 6% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Real GDP, YoY% Forecast …as unspectacular upturn continues Source: Oxford Economics
- 10. 10 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Inflation consistentlyabove target… Source: National Statistics 2% Target
- 11. 11 0% 2% 4% 6% 8% 10% 12% 14% 16% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Consumer Price IndexBase Rates Forecasts …but should ease next year, as rates move higher Source: Oxford Economics
- 12. How is Birminghamfaring?
- 13. 13 GDP Growth: UKvs Birmingham Source: National Statistics, Oxford Economics -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 UK West Midlands Birmingham Sources: National Statistics, Oxford Economics Gross Value Added % p.a. Forecast
- 14. 14 Employment slowly recovering Source:National Statistics, Oxford Economics -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 UK West Midlands Birmingham Workforce jobs growth (% pa) Forecas
- 15.
- 16. 16 UK yields stabilising 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EquivalentYield % Retail Industrial Offices Forecast Source: Jones Lang LaSalle, IPD
- 17. 17 Modest rental growthexpected -15 -10 -5 0 5 10 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YoY% Retail Industrial Offices Source: Jones Lang LaSalle, IPD Forecast
- 18. 18 Total returns tomoderate -30 -20 -10 0 10 20 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 % Retail Industrial Offices Source: Jones Lang LaSalle, IPD Forecast
- 19. 1919 Birmingham - Offices Source:Jones Lang LaSalle -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YoY% 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 %Prime Office Rental Growth (LHS) Prime Office Yield (RHS) Forecasts
- 20. 20 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YoY% 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 %Prime Unit ShopsRental Growth (LHS) Prime Unit Shops Yield (RHS) 20 Birmingham – Unit Shops Source: Jones Lang LaSalle Forecasts
- 21. 21 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YoY% 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 %Prime Logistics RentalGrowth (LHS) Prime Logistics Yield (RHS) 21 Birmingham – Logistics Source: Jones Lang LaSalle Forecasts