Next year could present the ‘buying opportunity of a generation’ in ‘some sectors, for some investors’ despite the looming threat of a recession, according to Savills’ 2023 cross-sector forecasts.
The consultancy group said that the ‘long, post-global financial crash cycle’ had now ended and that the market was about to enter a new era where income would be the ‘main driver of returns across most major asset classes’.
Savills predicted that retail warehouses would perform particularly strongly and were posed to generate the highest investment returns of any sector in the next four years, atn9.8%. Warehouses and prime offices were both expected to deliver rental growth due to continued occupier demand, said the agency. It forecast that commercial prime capital values would reach their nadir in early summer 2023.
Savills said 2022 marked a turning point for the residential market, with the higher cost of debt expected to suppress transaction levels and put downwards pressure on prices in 2023 and the first half of 2024. It predicted that house prices would fall 10% nationally in 2023, but added these losses were likely to be made up by 2026.
James Gulliford, joint head of UK investment at Savills, said: “The second half of 2022 saw the most rapid repricing of market yields that we have ever recorded, and this sets us up for a return of activity and then a period of price stability later in 2023. In some sectors, for some investors, this could be the buying opportunity of a generation. But the long post-global financial crash cycle is over, and investors will have to approach this opportunity as a new era when income will be the main driver of total returns across most major asset classes.”
Savills’ top commercial investment picks for 2023:
Prime and green office development for delivery into 2025/6
High street shops in affluent commuter towns and London suburbs to capitalise on agile working-related shifts in consumer spending
Prime mid-box logistics development for delivery into an undersupplied 2024/5
Savills’ top residential investment picks for 2023:
For Investors – purpose-built student accommodation
For owner occupiers – towns at the edge of the commute
For developers – risk-off opportunities
