Commercial property investment transactions climbed to a six-year high in 2013, reaching a total of £44.7bn, according to the latest data from DTZ.
Investment surged in the second half of the year with nearly half of the yearly total spent in the last quarter alone. This resulted in a 31% year-on-year increase on 2012’s transaction volumes of £34.1bn.
One significant development was that more than half of the overall total (£22.9bn) was spent outside London, a reversal of the picture in 2012. The flood of money into the regions was driven primarily by domestic investors who also increased their overall outlay to a record £24.3bn across the year.
Foreign investors spent £20bn in 2013. Most of this – £14.2bn – was concentrated in Central London as overseas investors continued to seek prime assets, often secured off-market. However, their investment into the regions also increased.
Richard Yorke, Head of UK Research at DTZ, said: “Domestic investors’ willingness to spend matched the improving economic picture in the UK throughout 2013, resulting in their outlay increasing by 42% compared to 2012.
“Domestic investors are well placed to identify good opportunities across the UK and sought to exploit the record yield gap between London and the regions. Many UK firms sold London assets to fund their investment activity outside the capital, selling ‘high’ in London and buying ‘low’ in the regions.”
Asian investors continued to be the biggest foreign buyers of property in 2013, acquiring about £4.6bn, mostly in Central London. Conversely, domestic players were net sellers as they disposed of £28.7bn of property against £24.3bn of purchases, capitalising on demand for prime assets while seeking comparative value in the regions.
A notable feature in 2013 was increased investor appetite for larger deals, which resulted in a wave of large transactions in 2013. Over 120 deals worth £100m or more were concluded, driven by foreign investors’ acquisition of super prime London offices and regionally dominant shopping centres. Examples of the latter included CPPIB and Hammerson’s £307m purchase of the Bullring shopping centre in Birmingham, and AustralianSuper’s purchase of a 50% interest in thecentre:MK in Milton Keynes for £270m.
James Bladon, Associate Director at DTZ in Birmingham comments: “Investment transactions in the Midlands totalled £2.58 billion in 2013, up 37% on 2012, a bigger percentage increase than for the UK as a whole. The quarterly totals increased over the course of the year as the improving economic situation gave investors increasing confidence to relinquish their London focus and seek the better returns available in the region. The retail sector saw the largest amount of investment, helped by the £307 million sale of a part share in the Bullring shopping centre, followed by the industrial sector, reflecting the region’s key location for logistics and resurgent manufacturing sector.
“The increase in investment activity has resulted in an increase in prices, for prime assets and locations particularly, although this is starting to feed through to secondary assets, with the improved confidence and a lack of prime opportunities to meet investor demand. While investment activity is expected to hold up in 2014, it is likely to fall in 2015 as rising prices squeeze returns and therefore investor demand.”
