This performance propelled investment for the year as a whole to £59.6bn – the second highest annual total on record after the £61.7bn posted in 2006, and 18% greater than the volume of deals in 2013.

A strong quarter for London offices

The demand for Central London offices was a key driver of the activity in the final quarter of the year, with investment in this sector more than doubling from the previous quarter.

In addition, the latest edition of Lambert Smith Hampton’s UK Investment Transactions report reveals that investment in the UK regions increased by 41% to £21.1bn for the year as a whole – the second highest figure on record. This is primarily the result of the resurgence of UK institutional investors – which increased inflows by almost 30% in 2014 – buoyed by improving economic sentiment beyond the capital.

Overseas investors dominate

Overseas investors continue to be the largest buyers of UK commercial property, with investment from the US more than doubling year on year and interest from the Far East also increasing significantly.

Ezra Nahome, CEO of Lambert Smith Hampton, said: “The commercial property investment market enjoyed a stellar 2014, and activity was within a whisker of breaking the record that was set at the height of the last boom in 2006. Transaction volumes are now roughly double what they were as recently as 2012, which reflects investor appetite for commercial property in both London and the regions.

Volumes to return to trend levels...

“While the headline numbers may invite comparisons with the last boom, there is an important difference this time: investors are now considerably less reliant on debt finance. As a result, our forecasts point to transaction volumes returning closer to trend levels in 2015. The uncertainties surrounding the forthcoming General Election may also serve to dampen activity.

“Against the general trend of a softening in investment volumes, expect the so-called ‘alternative sectors’ - such as healthcare, student accommodation and the private rented sector - to be major growth areas. Investors will also move up the risk curve to make the most of secondary opportunities, and those with in-depth market knowledge are going to be in the strongest position to capitalise.

...and returns to moderate

“Returns reached almost 20% last year but will moderate to somewhere near to 10-12% in 2015. Values should continue to rise over the next 12 months – particularly outside London and for good quality secondary assets – but at a much slower pace than that seen recently. Moving forward, the main driver of returns will be income generated by the continued rental growth prospects in the occupier markets.”