Oil Prices Affecting Real Estate Market.

Global real estate markets are most vulnerable in economies with not just a greater dependency on oil but also in those with a high cost of oil production. Combined, the above factors will squeeze profit margins in these markets, leading to staff reductions and ultimately forcing companies to reorganize, downsize and consolidate their real estate footprint.
 
As with any commodity, oil has periods of volatility.  At this point in the cycle, world oil prices are recovering but still operating in a landscape characterized by excess supply.  OPEC's strategy of keeping output steady rather than slimming production to underpin pricing has forced high-cost producers to rethink in the short-term.  Oil prices are notoriously difficult to predict, with prices typically moving sharply and significantly once they start to recover - and commentators are currently divided on the future of oil prices.  Whilst the bottom has been called, some think sustained growth has returned, while others expect a few years around the US$50 per barrel mark due to Saudi Arabia's continued strategy to suffocate high-cost rivals.
 
As consumer spending is such an important and malleable channel for oil price fluctuations to affect, the publication states an anticipated 1.5% boost to consumption from the lower oil price will equate to an additional 1-2% rental growth over 2015-16 in the UK retail sector.  A good short-term boost to retail rents and returns is expected but unlikely to be a sustainable driver of returns for the medium to long-term.