commercial property lambert smith hampton

News - 02/11/2015

Industrial sector boosts East Midlands

Investment in the industrial sector in the East Midlands during the third quarter of 2015 boosted the region's commercial property prospects, according to new research by commercial property consultancy Lambert Smith Hampton (LSH).

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The latest edition of LSH's UK Investment Transactions (UKIT) report reveals that investment volumes for the quarter in the region stood at £298 million, with 79% of this activity being in the industrial sector, with more than £243 million worth of transactions.

Key deals included Warth Park in Raunds, Northamptonshire, which was acquired by Tritax Big Box REIT plc for £67 million; Markham Vale in Chesterfield, acquired by M&G Real Estate for £36 million; while SEGRO plc's purchase of Brackmills Industrial Estate in Northampton was £31 million.

Adam Ramshaw, regional director for LSH, said the report shows that quarterly activity in the East Midlands remains above the five-year average, with a broad spectrum of buyers seeing opportunity and value in the region.

“Given the superb connectivity of the East Midlands region and quality of the standing stock, it is no surprise that the industrial market in particular continues to perform strongly,” he said.

“Continued demand from occupiers and investors coupled with a scarcity of stock means that we should further pressure on pricing.”

The national picture saw investment in the UK commercial property sector during the third quarter of 2015 reach £12.8bn, according to the UKIT report.

Although this represents a 23% decline on the previous quarter – and is the third successive quarter in which volumes have fallen – investment for 2015 as a whole may just eclipse the record of £61.7bn set last year.  Investment for the year to date currently stands at £48.5bn.

In addition, the report reveals that investment volume in the UK regions during Q3 exceeded that in London for the first time in 12 months.  This helps to explain the reduction in the average lot size from £35m to £25m, and the fact that total transaction volume fell despite an 8% quarter-on-quarter rise in the number of deals. 

The report also finds that UK institutions were net dis-investors in commercial property for the first time in Q3 since mid-2012, with a number of key institutions appearing to rebalance their portfolios by cashing in within London whilst continuing to invest outside of the capital. Overseas investors continue to hold their position as the largest net buyer of UK property.

According to the report, transaction yields have fallen slightly from 5.69% to 5.55% in the past quarter, to stand at their lowest level since the end of 2007.

Ezra Nahome, CEO of Lambert Smith Hampton, said: “We continue to see high levels of interest among investors for UK commercial property. 

“Although there are signs that the market is starting to return to more sustainable levels of activity, we’re seeing a considerable stock of properties under offer, on the market or being prepared for sale.  This all points to a dynamic end to 2015 and a very real prospect that investment will hit a new annual record this year.

“London continues to perform strongly and will remain the most important market for overseas investors.  However, it’s encouraging to see capital flowing back into the regions in a meaningful way as investors rebalance their portfolios in response to improving confidence and the price of assets in London.”


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