Total investment up 51% on 2013
Total investment for the region in 2014 is up 51% on the previous year despite investment figures for Q4, 2014 being down 28% on Q3 in the same year. A significant peak in investment in Q2, 2014 has led to the record breaking total for the year, including significant deals in Manchester such as the £320m sale of the RBS building in Spinningfields and the £132m sale of City Tower at Piccadilly Gardens.
Office demand buoyant
The demand for offices remained buoyant in Q4 at 33% of total investment across all sectors. Significant office deals included: The Capital, Liverpool bought by Starwood for £55m; 4 Hardman Square by Orchard Street for £31.02m and Peter House, Oxford Road by Rockspring UK Value Fund for £23.7m.
The highest value deal across other sectors was at Omega South, Warrington, where LondonMetric forward funded a unit let to The Hut Group for £47.5m.
Investment in UK regions up
In addition, the latest edition of Lambert Smith Hampton’s UK Investment Transactions report reveals that investment in the UK regions increased by 41% to £21.1bn for the year as a whole – the second highest figure on record. This is the primarily the result of the resurgence of UK institutional investors – which increased inflows by almost 30% in 2014 – buoyed by improving economic sentiment beyond the capital.
Overseas investors continue to be the largest buyers of UK commercial property, with investment from the US more than doubling year on year and interest from the Far East also increasing significantly. Overseas investment in the North West at £354.4m accounted for 10% of all overseas investment in 2014.
Increased momentum in investor appetite
Abid Jaffry, Director and Regional Head of Capital Markets at LSH said: “The commercial property investment market enjoyed an outstanding year in 2014 with the highest total investment since 2011. Transactions have more than doubled compared to last year which reflects the increasing momentum in investor appetite, especially in the regions. We expect momentum to continue into 2015 with investors looking at alternative sectors and good quality secondary assets.
“While the headline numbers may invite comparisons with the last boom, there is an important difference this time: investors are now considerably less reliant on debt finance. As a result, our forecasts point to transaction volumes returning closer to trend levels in 2015. The uncertainties surrounding the forthcoming General Election may also serve to dampen activity.
Growth in alternative sectors
“Against the general trend of a softening in investment volumes, expect the so-called ‘alternative sectors’ - such as healthcare, student accommodation and the private rented sector - to be major growth areas. Investors will also move up the risk curve to make the most of secondary opportunities, and those with in-depth market knowledge are going to be in the strongest position to capitalise.
Values should continue to rise over the next 12 months for good quality secondary assets – but at a much slower pace than that seen recently. Moving forward, the main driver of returns will be income generated by the continued rental growth prospects in the occupier markets.”