After five years of reporting on the decline of the UK property investment market, we can at long last highlight increased activity through 2013 and even rising values for certain types of properties, reports Mike Oldreive of Vickery Holman.
This coincides with the flood of good news in respect of the UK economy, with the Chancellor of the Exchequer, George Osborne, confirming that gross domestic product in the UK economy grew by 0.7% in the second quarter of the year, and predictions that it could reach 1% by the end of the current quarter. It is also reported as we enter October that UK manufacturing grew for the sixth consecutive month in September, recording the strongest quarterly performance for 2½ years.
Increased activity is probably the best way to describe the market over the last six months which has increased competition, particularly for prime and will increase values over the next six months. No real evidence of this yet so the table below remains largely unchanged.
|
Retail |
Office |
Industrial |
Residential |
|
| October 2007 |
5.0% |
5.75% |
6.25% |
3.0% |
| October 2008 |
6.5% |
7.8% |
8.8% |
N/A |
| October 2009 |
5.75% |
7.5% |
7.75% |
6.0% |
| October 2010 |
6.0% |
7.25% |
7.5% |
6.0% |
| October 2011 |
6.5% |
7.75% |
8.0% |
6.8% |
| October 2012 |
7.0% |
8.0% |
8.5% |
7.0% |
| October 2013 |
7.0% |
8.0% |
8.0% |
6.5% |
The exception to this is multi let industrial estates which twelve months ago were achieving double figure net initial yields. For the better quality estates this is now under 10% and even as low as 8.5% at the smaller end of the market. The popularity of the industrial market is largely due to occupier demand which has held up throughout the recession and likely to show growth in rents in the not too distant future which is attracting investors.
Offices on the contrary have been the worst performers but consequently look like real value for money as business sector recovers. The most important factor with offices will be environmental issues (EPC ratings) and having efficient, well run and attractive buildings. Poor stock will be lost to the residential market in its many forms.
Retail has been another sorry tale and whilst it has been subject to the largest falls the sector could be the quickest to recovery in the South West. This is particularly true of the more attractive market towns where there is still strong demand from retailers. Smaller lot sizes with potential to add value through the upper floors will continue to be popular with the smaller investor. Detailed rental analysis is critical for buyers as a lot of properties remain substantially over rented.
