There is now a wealth of positive survey data that indicates continued expansion of the services sector. For example, both August and September’s PMI surveys were at a seven year high. Together with survey data from other sectors, this suggests economic growth could exceed 1% in the fourth quarter of the year.

Continuing economic recovery

Why has there been this sudden upswing in output? Perhaps unsurprisingly economists have disagreed on the reasons for this, which range from an improvement in the global economy to the positive effect government policy is having on the debt and housing markets. The likely explanation is a combination of factors, but the slow improvements seen in the Eurozone have certainly helped to boost confidence, especially among businesses.

The rate of growth is expected to slow towards the end of this year, however, a variety of indicators provide reassurance that the recovery has become self-sustaining. The consumer confidence index is at its highest level since November 2007; inflation is set to fall, which will boost consumer spending; government policy has provided a boost to the housing market; businesses are starting to spend their cash reserves; and export demand looks to be on the rise.

Oxford Economics’ latest forecast is for the economy to grow by 1.4% in 2013, before accelerating towards growth of 2-2.5% from 2014 onwards. In the short term at least, the risks are slanted towards the upside and growth this year could be higher than the forecast suggests.

Commercial property investment hits six year high

Data from our UK Investment Transactions (UKIT) report shows that property investment volumes reached a six year high during Q3 2013, reflecting the growing confidence in the UK’s economy. At £11.6bn, levels are 50% above the £7.6bn a quarter the market has averaged since end 2010 and 40% above the Q2 investment total of £8.24bn. This rise has come off the back of a big increase in deals for London property, which topped £7bn this quarter, and growth in regional investment volumes, which are at a two and a half year high.

At £6.8bn, offices accounted for almost 60% of all quarterly investment activity: above the 2012 average of 50%. Of this, £4.97bn was invested in Central London offices. This has more than doubled the total transacted in these markets in the first half of the year, where investment levels dropped slightly due to a lack of available stock.

In the retail market, quarterly investment totalled £2.1bn. Investors showed strong demand for prime retail warehouses and shopping centres, and outside London regional investment volumes actually outstripped the other asset classes. The general improvements in the market and increased optimism over the economy mean retail investment has already eclipsed the 2012 total.

In the industrial market, quarterly investment totalled £1.09bn. This was driven in particular by demand for distribution warehouses, where there is still strong competition for good quality logistics units.