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News - 05/02/2018

North East investment volumes slump but alternatives sector witnesses record breaking year

Commercial property investment activity across the North East reached its lowest level in five years during 2017, according to our latest UK Investment Transactions (UKIT) report.

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Just £67.3m of property assets changed hands across the North East in Q4 2017, bringing the annual total for the year to £350m, down 48% on 2016.

Lack of big ticket deals hampers volumes

The North East witnessed a downward trend in big-ticket investments during 2017, with the average deal size falling from £15m in 2016 to just £8.14m in 2017, and only 10 transactions above £10m compared with 20 in 2016. The largest deal in Q4 being UK CPT’s purchase of the Maldron Hotel in Newcastle city centre for £33m.

Strong performance from industrial and alternatives sectors

2017 was a year of contrasting fortunes between the various property sectors. Insatiable demand for alternatives drove a record-breaking year for the sector, with a total of £181minvested smashing the previous high of £158m set in 2016 and accounting for a 52% share of volume.

The industrial sector also saw an uptick in activity, with over £50m invested during 2017 – more than double the previous year.

Meanwhile, investors remained averse to the traditional office and retail sectors, with another poor quarter in Q4 taking the annual volumes to £35m and £83m respectively, down 48% and 88% from 2016.

UK quoted companies and private investors make emphatic return

Q4 also marked the emphatic return of UK quoted companies and private investors to the market, with investment surging to £64m and £71m in 2017, returned to a level similar to that witnessed in 2015.

However, notable by their absence were UK institutions and private companies who, at just £127m and £29m respectively, recorded their lowest levels of investment activity in over five years.

Bill Lynn, Head of Capital Markets across the North East at LSH, said: “The lack of quality stock being brought to the market has undoubtedly affected investment volumes across the North East. That said, there is clearly an appetite for deals, with alternatives witnessing their strongest-eve year and industrial showing signs of returning to near-normal levels.

“The emphatic return of UK quoted companies and private investors to the North East also confirms that the North East is seen as a solid investment option.”

Download the Q4 2017 UKIT Report


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