- South West investment as a whole totaled £452m in Q1 2016, which was 52% up on the previous quarter and 44% above the five-year average.
- Investment into South West offices totaled £269.5m for the quarter which was 1% less than Q1 2015 (at £272 million).
- Across the UK, Q1 2016 saw a marked decrease in investment volume. At £10bn it was down 41% from Q4 2015 (£17.1bn). From the same period last year it was down 57.8%.
- Q1 2016 UK investment was also below the quarterly long term average of £11.4bn (from Q1 2007).
In spite of the SW’s strong performance in Q1 compared with the UK market, we anticipate that Q2 and Q3 will be considerably quieter as a direct result of the Brexit referendum in June.
This can be attributed in part to the volume of properties being brought to market, which has significantly reduced since the referendum was announced. Equally, the majority of pension funds have chosen to either hold back until after the 24th June or are only buying very selectively.
This mirrors the impact of the Scottish independence referendum in September 2014 when the Scottish property investment market almost ground to a halt due to uncertainty around the economic impact of the vote and took some months to recover.
The lowest yield seen in Bristol in Q1 2016 was for the sale of 2 College Square, set within the popular Harbourside development. The building was sold by M&G Real Estate to CBREi Global Investors for £22.775 million, reflecting a yield of 4.97%.
Bristol continues to remain popular with funds, property companies and an increasing number of overseas investors who have been attracted by the relatively high yields offered in comparison with those in London. The City’s strong occupational market and lack of Grade A and even Grade B space has further improved the attraction of Bristol to investors.
We therefore anticipate that, whilst volumes are likely to slow in the next two quarters, yields for Bristol offices should remain at a consistent level through this period, irrespective of the Brexit result.
In the short term, this uncertainty is more likely to impact on the smaller West Country cities and towns, with the exception of Bath where demand remains strong and opportunities to buy are rare. We do not foresee a significant fall in values but a downward movement in yields of around half a percent.