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News - 22/07/2015

Regions dominate as UK commercial property continues to attract overseas buyers

Investment in UK commercial property reached £36.0bn during the first half of 2015 – the second highest total on record - thanks in part to a strong performance from the regions, according to new figures from Lambert Smith Hampton’s latest UK Investment Transactions report.

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The latest edition of UKIT reveals that investment volumes between April and June totalled £16.8bn, a 33% increase on the same period last year.

However, while Q2 volumes were only 12% down on Q1’s record for a first quarter, the number of deals has been less impressive: the number of transactions slipped by 25% and was marginally below the long run quarterly average.

The regions remained the largest beneficiaries of investment, accounting for £21.2bn of total volume in the first half of the year – one of the strongest performances on record.

Overseas investors continued to be the largest net buyers of UK commercial property between April and June, accounting for over 50% of purchases. North America was the main driver of this, underpinned by a handful of major portfolio deals. 

The robust economic outlook has also encouraged continued yield compression - average transaction yields came in by 29 basis points to stand at 5.69%, the lowest level since the end of 2007.

Broad-based demand

Ezra Nahome, CEO of Lambert Smith Hampton, said: “The UK commercial property market continues its bull run. 

“Appetite is broadly based, with investors from across the globe acquiring a range of assets located throughout the country.  We’ve long championed the merits of investing in the regions and it is pleasing to see that confidence now being reflected in the market.

“The dip in the number of deals reported during the second quarter of the year suggests that the uncertainty surrounding the outcome of the General Election may have persuaded some investors to temporarily retreat to the sidelines.  

Strong second half of the year in prospect

“However, with the investment case for UK commercial property remaining robust, we expect a strong second half of the year, potentially even overtaking last year’s annual total of almost £62bn.”

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