Investment market starting to level off, says JLL

The deterioration of confidence in the UK commercial real estate investment market has softened in the first quarter of this year, according to the latest survey from Jones Lang LaSalle.

JLL said the share of 300 principals and lenders surveyed who expected to see 'slightly higher' returns going forward rose to 42% from 27% in Quarter 4 2008.

Nearly half of the sample expected no change in their outlook which suggests respondents feel the market is levelling off.

Jonathan Mills, head of national investment at JLL Manchester, said: "This improvement in investors' sentiment during this quarter is fundamental as, along with the tangible key economic drivers and fundamental principles of property, sentiment remains a key element to the level of exposure and therefore purchasing power investors are willing to commit to the real estate market.

"Bearing in mind current interest rates and the poor performance of other investment sectors, in our opinion long term income has reached its level. However, in the more risky income profile, we believe there is potentially further movement based on a weakening occupational market, the extent of which will only become apparent when you look at individual assets."

He added: "On a positive note for the future, we believe the market is adjusting itself to this way of thinking and potentially we will have sight of the bottom of our market during 2009."

The findings of the JLL Q1 2009 survey were outlined at a seminar in Manchester this morning.

Paul Guest, head of European research at JLL, added: "The economic outlook is one of the most challenging the commercial property market will have faced. Occupational conditions are deteriorating as defaults rise and business sales fall, while job cuts will bring second-hand space back on to the market, creating a further downdraft. Credit conditions are slowly levelling out and though the recovery will be a gradual one, this will create opportunities for savvy investors and occupiers able to take advantage of these conditions."