Country Report Great Britain Q3-2021
“UK real estate has generally performed well during 2021.”

Dear readers,

"In common with the rest of Europe and the world, we are seeing signs of “stagflation” as supply chain interruptions are holding back growth and inflation is increasingly becoming a factor. This is likely to feed through to development tender prices in the near future. 

UK real estate has generally performed well during 2021 and most sectors are seeing stability or positive investor sentiment. Cross border capital flows mainly from North America increased significantly in H1 2021 and domestic institutional purchasers continue returning to the market chasing yield. PRS and supermarkets continue to attract strong interest whilst the logistics sector is outperforming. ESG criteria and altered working patterns as staff return to the office are driving demand for high quality and green buildings in the office sector. Active tenant requirements equate to ca 10 mln qm² currently, about 40% higher than last year. 

Overall, the UK real estate outlook remains positive against a background of slowing economic recovery, with near term interest rate rises seeming to be held back despite rising inflation."

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

REECOX UK at new all-time high

Like its European counterparts, the UK Real Estate Economy Index proved virtually stable in the third quarter. A 1.3 % increase in July was followed by a sideways movement in August (+0.1 %) and then no change whatsoever in September. The REECOX UK closed the third quarter at 222.9 points – a new all-time high (since January 1991).

All input variables up

The new record achieved by the REECOX UK is due to the generally positive performance of all input variables. The FTSE EPRA/NAREIT UK real estate share index posted the highest quarter-on-quarter growth of 3.8 %, reaching 1,303.8 points at the end of Q3 in September. The FTSE 100 blue-chip index showed no significant upward or downward movements, which resulted in a stable development of +0.7 % to 7,086.4 points. The business climate as measured by the Economic Sentiment Indicator (ESI) remained in positive territory in the third quarter, but displayed a more muted trend compared with Q2: after beginning Q3 with a 1.9 % increase, the ESI was almost unchanged in August (-0.4 %) and September (+0.3 %). The high quarter-end figure of 107.2 points had previously not been seen since October 2018.

Synopsis of Input Variables and Real Estate Economic Situations Q3-2021

Country

Stock Index

Real Estate Economy Index

Economic Indicator

Base Interest Rate

Interest Rate 10-Year Government Bonds

Q2-2107/2108/21Q3-21Delta (%)
Q2-21 / Q3-21
DE
do
do
eq
eq
eq
356.4
360.1
361.7
354.5
-0.5
GB
eq
up
up
eq
eq
219.9
222.8
222.9
222.9
1.4
PL
up
up
do
eq
up
197.8
198.1
198.7
198.5
0.4
NL
up
do
do
eq
do
204.3
205.5
204.6
203.3
-0.5
FR
eq
do
eq
eq
do
245.0
250.5
247.7
243.4
-0.7
ES
eq
eq
up
eq
do
183.4
184.9
184.7
186.0
1.4