The fortunes of the UK stock market are a leading indicator for the corporate property market, accor...
The fortunes of the UK stock market are a leading indicator for the corporate property market, according to real estate specialists Baring, Houston & Saunders (BH&S).
The company argues that following individual sectors is more useful than looking at the overall direction of equities.
Keith Alexander, senior analyst at BH&S, said: 'Four of the five worst-performing sectors in 2000 are high-tech, which includes IT hardware, telecom services, information technology and software. As the majority of high-tech companies are located along the M3 and M4 corridors, we can expect rents there to continue to fall.'
This link between equity markets and office demand was last seen during the Russian debt and Asian financial crises in 1998 when demand for offices in the City of London fell and rental growth ceased altogether.
Alexander added: 'In real terms, the City of London and the regional office centres are some way off their historic peaks. But in the West End and South East, office rents have surpassed their historic peaks and therefore require much lower vacancy rates to support rental growth.'
While the outlook may be poor for this part of the market, BH&S is more upbeat about the outlook for the retail property market as the FTSE retail sector index has outperformed the All-Share so far this year.
Alexander said: 'This suggests growth prospects for the sector have now improved. However, this has yet to be reflected in the retail property market as retail rental growth continues its gradual decline, with the latest three-month indicator figures diving further in June.'
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