london skyscrapers

JLL has unveiled predictions for the property sector in 2017, hosting a panel session to discuss the key political and economic trends that will shape the coming year.

The panel was chaired by BBC Business Editor Simon Jack who was joined by Rain Newton Smith, Chief Economist at the CBI, Ollie Saunders, Lead Director for Alternatives at JLL, Shelley Frost, Head of Consulting at JLL, Rob Wilkinson, CEO at AEW Europe and Jon Neale, Head of UK Research at JLL.

JLL predicts that 2017 will see no real clarity on the eventual Brexit deal, that the UK economy will grow less strongly than in recent years but will still outperform most other developed nations and that there will be a rise in inflation and market interest rates.

The panellists also believe that this year will see a growth in corporate M&A activity, an increase in UK investment volumes from last year and the continued momentum of the Alternative investment market with a particular focus on the retirement living sector. Uncertainty for occupiers will continue throughout the year due to Brexit and local and global political factors which will mean more flexible leases and a boon for the co-working providers.

The panel agreed that while some banks and financial organisations may take space in European cities such as Frankfurt and Berlin as a result of the EU referendum, the numbers will be small and that overall London will remain an attractive location.

Shelley Frost, Head of Consulting at JLL, commented: “Post Brexit London will still be seen as an attractive location due to availability of skills, flexibility of labour laws and the advantages of language. We will see increased demand from fintech and take up in the tech sector will remain robust as the growing fintech cluster that we are seeing in regional locations such as Manchester highlights. Government figures suggesting that up to 90,000 jobs may leave the UK is scaremongering.”

Rob Wilkinson, CEO of AEW Europe added: “There’s a long way to go before cities in France and Germany can compete with London. From an investor perspective we didn’t see a great fire sale of London property post referendum and this year we should see an increase in investment volumes.

The panel discussed government commitment to infrastructure investment and unlocking regional growth potential following the announcement of extra spending on infrastructure and research  & development in the Autumn statement.

Rain Newton Smith, Chief Economist at the CBI, said: “The Government’s focus on research and development at the Autumn Statement was welcome, but there is more to be done, both by business and government.

“There will be opportunities for growth in the North and the Midlands but infrastructure spending and improving productivity will really unlock growth. It’s also vital that there is investment in digital and well as physical infrastructure.”

Jon Neale, Head of Research at JLL UK believes that the spotlight for this year will be on the big six regional cities due to public realm improvements and far more students choosing to stay in cities such as Birmingham and Manchester post-graduation. “There is still a huge divide in skills and productivity between the North and South in the UK and this needs to be addressed through policy. The danger is that the government’s agenda may become too full with the Brexit negotiations to address these.”

The panel agreed that 2017 should be the year that the property industry embrace the growth of technology and the opportunities it presents in the wake of the explosion in data over the last couple of years.

The rise of the Alternative investment market was also discussed. Ollie Saunders, Lead Director of Alternatives at JLL, commented: “We predict that 2017 will see alternatives outperform the rest of the market –  with healthy income returns and an anticipation of yield compression.   Alternatives made up more than 25% of all commercial transactions in 2016 – up from 10% in 2010 : they are a meaningful and maturing part of the UK property market.”

Source: JLL