Consensus Forecasts

The latest IPF Consensus Forecasts have just been released (you have to be a member to get access). They’re broadly consistent with increasing negative sentiment for the UK’s commercial real estate sector.  The big picture remains unchanged since the November forecasts.  2016 is expected to be the last year of total returns of between 8% and 10% for most sectors. Total returns are predicted on average to be between 4% and 6% per annum between 2017 and 2020.  With rental value growth predicted at 2%-4% for the most sectors, it’s implied then that yields are likely to stabilise at the currently historically low levels, stay broadly stable or possibly nudge up very slightly over the next four years.  The latest consensus forecast for rental value growth in shopping centres is 1.2% in 2016 and 1.8% in 2017.  Compared to the November consensus forecasts for 1.7% in 2016 and 2.1% in 2017, it doesn’t suggest that increases in disposable incomes from low oil prices and increasing incomes are expected to increase the demand for shopping centre space.