Commercial property research and viewpoints

Q1 2013: Investors move towards alternative assets and portfolio deals

23/04/2013

Investment across the UK increased by 8% to £8.05bn and the average deal size reached a new high of £28m in the first quarter of 2013 – according to our latest research, UK Investment Transactions Q1 2013.

Investment across the UK increased by 8% to £8.05bn and the average deal size reached a new high of £28m in the first quarter of 2013 – according to our latest research, UK Investment Transactions Q1 2013.
Commenting on what caused this, Ezra Nahome, CEO said: “Investor appetite for portfolios and alternative assets spiked in first quarter of 2013 with the number of portfolio deals reaching £2.76bn and £1.95bn of transactions for commercial assets other than offices, retail and industrial being recorded.

“Hotels, hospitals, motorway service stations, shopping centres and trade parks all transacted and the largest deal to complete in Q1 was the sale of 12 private hospitals (Spire) for £700m. This change in activity is as a consequence of investors being priced out of London and being attracted by the secure income and risk diversification that portfolios and alternative assets offer.”

Investment in Central London offices falls by 25%

The demand for portfolio and alternative asset sales acted to fill the gap from the 25% drop in investment in Central London offices.  This drop is particularly noteworthy as the Central London office market has driven the market for the last two years as investors turned to the safe-haven of Central London during a time of economic uncertainty.

Explaining why a drop has occurred, Ezra said: “It is a lack of stock that is holding back investment - after high transaction volumes in Central London over the last two years we have now reached a point where the amount of stock being brought to the market has slowed. In addition, the high prices demanded for Central London assets may have deterred some investors, but even after a 25% drop in activity offices remains the asset class of choice and Central London offices is still the most important submarket.”

Regional activity on the return

The yield gap between prime and secondary, and London and the regions looks to have finally started to cause activity in the regions with £850m invested in portfolios of regional office, retail and industrial assets in Q1 2013.

“Pricing for secondary regional properties is starting to reach a level that makes the investment decision an easier one to justify than it was 12 or even six months ago,” Ezra said. 

Overseas investors still dominate

As seen through-out 2012, overseas investors were the biggest net-investors into the market in Q1 2013 – recording just under 50% of the quarterly investment volume (£2.5bn) and were involved in six of the top 10 deals by size.

Predictions for 2013

Investors will increasingly look to the regions and regional portfolios as they are either priced out of London, see little value in the market, or are less risk-averse.

Concluding, Ezra said: “At present the aggressive pricing of prime Central London stock is limiting the market to mostly overseas investors. Now pricing has moved out sufficiently between London and the regions to alter the balance between risk and reward.”

For further information relating to this news article contact 

Contact us now

Ezra Nahome
CEO

020 7198 2222

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