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Dear readers,
“Russia’s invasion of Ukraine in February and the subsequent sanctions and disruptions have exposed European and global vulnerabilities. COVID related supply chain issues remain of some concern and closer to home shortages in the UK labour market present additional challenges. High inflation rates and slowing economic growth figures are presenting central banks with a very real risk of stagflation or worse, the Bank of England even warning of recession and double-digit inflation. The UK base rate is now 1%, its highest level since the Financial Crisis. Against this difficult backdrop, investors are looking for stable longer-term investment opportunities such as UK CRE. Cross-border investors in particular are returning to the market now that travel restrictions have eased. We are seeing increasing activity in the accommodation sectors where a real need for housing is meeting the general investor perception of housing investment providing a level of inflation protection. In the office sector central London and regional cities remain to be popular with yield compression seen in some major regional cities. Quality leads in all areas. Investment volumes in office assets more than doubled year-on-year in Q1 2022 and overall investment transaction volumes in Q1 2022 are also firmly up year-on-year.”
Claudia Nacke
Contact
Ms Claudia Nacke
Head of Real Estate Finance UK, London Branch
Phone: +44 20 742 947 00
E-mail: Claudia.Nacke@DeutscheHypo.com
January 2022 saw a slight upward trend (+1.1 %) following the negative performance of the UK real estate index towards the end of 2021. However, declines rematerialised in February (-1.0 %) and March (-0.2 %), resulting in overall stagnation for the REECOX UK in the first quarter of 2022.
The performance of the input variables was a mixed bag. At 7,515.7 points, the FTSE 100 blue-chip index finished the first quarter with a 1.8 % quarter-on-quarter gain. The business climate, as measured by the Economic Sentiment Indicator (ESI), also contributed to the robust performance of the real estate market in the UK, gaining 3.8 % quarter to quarter to stand at 101.6 points. The FTSE EPRA/NAREIT UK real estate share index, however, took a different path. After posting impressive gains in the fourth quarter of 2021, the start of 2022 saw a downward trend of 3.9 % that was fuelled by negative episodes in January (-6.0 %) and February (-4.5 %). By contrast, March saw a significant increase of 7.0 %.
Country | Stock Index | Real Estate Economy Index | Economic Indicator | Base Interest Rate | Interest Rate 10-Year Government Bonds | Q4-21 | 01/22 | 02/22 | Q1-22 | Delta (%) Q4-21 / Q1-22 |
|---|---|---|---|---|---|---|---|---|---|---|
DE | dodo | do | dodo | eq | upup | 343.4 | 340.1 | 334.3 | 320.6 | -6.6 |
GB | up | do | upup | upup | upup | 218.5 | 220.7 | 218.6 | 218.2 | -0.1 |
PL | do | do | dodo | upup | upup | 197.6 | 194.9 | 190.2 | 189.5 | -4.1 |
NL | dodo | do | do | eq | upup | 202.3 | 198.1 | 194.5 | 194.6 | -3.8 |
FR | do | eq | dodo | eq | upup | 251.6 | 248.7 | 246.7 | 240.0 | -4.6 |
ES | do | up | dodo | eq | upup | 186.0 | 186.1 | 187.0 | 181.6 | -2.4 |
