As we head towards the end of 2022, what started off as a year of potential opportunity as we emerged from the pandemic, is starting to look somewhat turbulent – both in property investment and wider economic terms.
At the start of the year, industrial property was king, representing over a quarter (26%) of deals in 2022, and there was no immediate prospect of that changing thanks to the pandemic boom.
The market remained strong throughout the first half of 2022, then things started to change.
It began with the slowdown in the industrial sector as the heat started to come out of the very top of the market, and yields began to move out as expectations around rental growth began to look less convincing. Themes such as rising business rates ahead of Revaluation 2023, rising energy costs and interest rates began to impact deal activity.
This was swiftly followed by the unfortunate events in Ukraine – the impact of which we are now starting to see on the cost of living and rising energy prices.
As we went into summer, the general economy and rising interest rates also started to affect the larger property investors in the market, as institutions were impacted by adverse pressure in the economy and stock market volatility.
Together, this has had a significant influence on the appetite for investment, with the number of transactions going into Q3 2022 over 50% down on the previous year.
Despite this, there was still money in the market, particularly from private investors. Following the Government’s not-so-Mini-Budget, however, we’ve seen further dramatic changes.
Investment risk is undoubtedly rising, and this is making some investors think twice about where best to invest their money, particularly when they can get a safe return from Government GILTs.
This is delivering an even bigger market adjustment as we head towards the end of 2022, as investors look over the horizon to see what happens next.