The latest edition of Lambert Smith Hampton’s UK Investment Transactions report also reveals that the regional markets are receiving more attention from investors, as prime central London prices continue to rise.  Investment in the regions more than doubled to £4.2bn, compared to £2.0bn during the first quarter of 2013, and now accounts for 39% of the total, against 25% in the corresponding period last year and 33% during the final quarter of 2013.

UK institutions were the largest net investors

The report finds that UK institutions were the largest net investors into the commercial property market, overtaking overseas buyers for the first time since the third quarter of 2011.  Net overseas investment dropped to £1.2bn in Q1 2014, from £2.4bn in the corresponding period last year, on the back of an increase in asset sales.

Another strong quarter

Ezra Nahome, CEO of Lambert Smith Hampton, said: “This has been another strong quarter for the UK property market.  Although we’re below the exceptional volumes recorded during the final few months of 2013, there is little doubt that the market recovery has significant momentum behind it thanks to the recovering economy, lack of new supply and improving occupier confidence. 

“Transaction yields for commercial property have fallen once again and are now at their lowest level since the middle of 2008 - we’ve experienced two year’s worth of yield compression in just eight months.

“The recovery in values has led to profit taking in some sectors, but investors seem to be holding assets for longer than in previous upswings, particularly in London, so we may reach a point where activity will start to slow as a result of a lack of available stock. 

The regions bounce back

“The most important message emerging from the figures is: welcome back, regional Britain.  The pricing of prime central London commercial property has encouraged many investors to look outside of the capital, with the West Midlands, the East and Yorkshire all experiencing a significant increase in activity in recent months.  London will remain the most important market for some investors, but it is encouraging to see the regions starting to narrow the gap.

“It is important not to read too much into the reduction in net inflows from overseas investors during the first three months of the year.  We’re continuing to see considerable interest from overseas buyers, particularly in London and the South East, and there is strong competition from UK institutions.”