Performance up 72% on 2013
This performance propelled investment for the year as a whole to £1,580m which is up 72% on the total volume of deals for 2013. It is also the highest annual total investment for Yorkshire since before 2007.
Office demand key driver
The demand for offices in the region was a key driver of activity in the final quarter of the year, with investment at 37% of all investment recorded. This was eight times more than Q3 when office investment was £26.4m. Total office investment for the year was up 169% on the total office investment for 2013.
The most significant deal impacting on the office sector was the half share purchase of Wellington Street, Leeds for £92.5m by CPPIB and Hermes Real Estate. This is a major development in Leeds combining 1.5m sq ft of mixed use space.
In terms of the industrial sector, major deals include: The forward funding of the Next unit at G Park by Legal and General Property for £65m and The Range at Nimbus Park which was bought by Tritax for 48.5m, both in Doncaster.
Investment in 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.
Highest total investment since pre 2007
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 in Yorkshire since pre 2007. We expect the momentum to continue into 2015 as more investors focus on the regions although this may be focused on 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.”