The total value of commercial property investment transactions in the North West during the first quarter of 2014 totalled £277.7m – a 31% increase on the corresponding period last year – according to new analysis by national commercial property consultancy Lambert Smith Hampton.
The latest edition of Lambert Smith Hampton’s UK Investment Transactions report also reveals that the regional markets are continuing to receive more attention from investors, as prime central London prices continue to rise. UK institutions were the largest net investors into the North West commercial property market, accounting for 37% of total investment volumes in Q1 2014. Net overseas investment dropped by 20% on the previous quarter, to £46.1m, on the back of an increase in asset sales.
The most significant deals to take place during Q1 included SWIP Property Trust’s acquisition of Sunlight House, Manchester for £34.5m, reflecting a net initial yield of 6.3%, Helical Bar’s purchase of Churchgate House and Lee House for £34m and CBRE Global Investors’ purchase of Circus leisure complex on Portland Street for £24.45m, both reflecting a net initial yield of 5.7%.
Abid Jaffry, Regional Head of Capital Markets at LSH commented: “Although investment volumes are lower than the exceptional levels recorded during the final few months of 2013, there is little doubt that the market revival is gaining significant momentum behind it thanks to the recovering economy, lack of new supply and improving occupier confidence. UK buyers remain key investors, accounting for 64% of total activity in Q1 and although we have seen a reduction in net inflows from overseas investors during the first three months of the year, we’re continuing to see increased interest from overseas buyers looking for opportunities within the region.”
Commenting on the UK as a whole, Ezra Nahome, CEO of Lambert Smith Hampton, said: “This has been another strong quarter for the UK property market. Transaction yields for commercial property have fallen once again and are now at their lowest level since the middle of 2008 – we’ve experienced two year’s worth of yield compression in just eight months.
“The recovery in values has led to profit taking in some sectors, but investors seem to be holding assets for longer than in previous upswings, particularly in London, so we may reach a point where activity will start to slow as a result of a lack of available stock.
“The most important message emerging from the figures is: welcome back, regional Britain. The pricing of prime central London commercial property has encouraged many investors to look outside of the capital, with the West Midlands, the East and Yorkshire all experiencing a significant increase in activity in recent months. London will remain the most important market for some investors, but it is encouraging to see the regions starting to narrow the gap.”