(Alliance News) - Savills PLC on Wednesday said its performance in the year so far has been impacted by capital transaction volumes falling to their lowest in a decade, and warned it would be "impossible" to accurately predict when a recovery would occur.
Shares in Savills were down 6.8% at 874.50 pence on Wednesday morning in London.
The London-based property agent said its performance in the UK has been largely in-line with expectations thanks to good levels of activity in the prime residential markets and some recovery in retail property.
Savills enjoyed an "unusually high" market share in prime transactional markets. It said that, partly because of Brexit, UK yields did not compress as much as other international markets, meaning prime real estate valuations have "largely corrected" already. However, Savills said other commercial capital markets in the UK have been "severely" impacted as pricing adjusts.
In continental Europe and the Middle East, Savills said transactional activity and volumes have been "severely" reduced as leasing momentum remains subdued and yields have moved out considerably. It noted that a correction in this is "well underway" though not yet complete, resulting in a significant impact in its business in the regions in the year-to-date.
More positively, Savills said that, in the Asia Pacific region, the business has traded well as sentiment in mainland China has significantly improved since the New Year and the end of Covid restrictions.
In North American, where the company is "substantially" dependent on leasing activity by corporate occupiers, its business performance has been in line with expectations.
"The strength of our less transactional businesses has helped underpin the group's performance overall. The anticipated market corrections in 2023 are happening largely as anticipated. As greater certainty over the future pattern of global interest rates is emerging, we expect progressive recovery through the third and fourth quarters of the year and into 2024," said Chief Executive Mark Ridley.
Looking forward, Savills said the range of outcomes for the year as a whole have widened as a result of global commercial investment volumes having either reached or approached their lowest levels in many years.
Consequently, Savills said it is "impossible" to accurately predict the timing of individual market recoveries, but nonetheless remained "optimistic" the markets will start to improve in the second half of the year.
"Confidence in the ongoing recovery and level of transactional velocity through the latter part of the year will be key to supporting our view that 2024 will show transaction volume growth in most markets. In the meantime, we continue to pursue opportunities to develop our business both through targeted recruitment and selective acquisition," Savills said.
Savills expects to release its half-year results on August 10.
By Heather Rydings, Alliance News senior economics reporter
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Savills (SVS)