Newspaper article The Journal (Newcastle, England)

A Positive Picture, but Room for Improvement

Newspaper article The Journal (Newcastle, England)

A Positive Picture, but Room for Improvement

Article excerpt


DESPITE the elections and referendum, the commercial property market in the region is performing well.

The Royal Institution of Chartered Surveyors (RICS) has published a paper on the forthcoming referendum on EU membership in which senior economist Jeffrey Matsu looks at the challenges ahead.

He points out that the 'single market' experience for the UK since joining the European Economic Community in 1973 has, by and large, been a positive one.

Enhanced product market competition has led to a decrease in the mark-up ratio in manufacturing from 38% to 28%, price dispersion has fallen significantly, and a rise in business innovation has lifted aggregate productivity and real wages.

Mr Matsu also points out that uncertainty will be the key economic transmission channel for either referendum outcome.

According to Ernst & Young's 2015 UK Attractiveness Survey, 72% of investors cite access to the European single market as important to the UK's attractiveness. Until the outcome of the referendum is known, 31% of investors will either freeze or reduce investment.

This has resonance with the result of the Q1 2016 RICS UK Commercial Property Market Survey published last week, which shows overall conditions in the sector remain firm at the national level.

This has been the trend in recent quarters; steadily rising demand and a lack of supply continue to push capital values and rents higher. Notwithstanding this, respondents are beginning to scale back expectations for future growth, particularly in segments of the market where values have run a long way and appear relatively stretched.

Furthermore, uncertainty surrounding the EU referendum is cited as dampening activity in several areas. When asked what impact an eventual Brexit might have on the UK commercial property market, only 6% of respondents nationally felt it would be positive in the long run. …

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