A more subdued UK commercial property investment market is leading to increased opportunities for property companies and private investors to take advantage of the strong rates of return offered by UK real estate, according to the latest market outlook report from a specialist real estate asset management company.
Blue Marble Asset Management says, in its Barometer for Spring 2016, that a slowdown in activity, as a result of forthcoming EU Referendum, especially among institutional investors, has increased the flow of potential deals to private investors and property companies.
According to Tim Matthews, Chief Executive of Birmingham- and Worcester-based Blue Marble Asset Management, investors are now being much more selective in their choice of acquisitions both geographically and by sector, than was the case in 2015.
Mr Matthews says: “This trend will continue for at least the next six months, as a result of the EU Referendum and possibility of a Brexit. No matter what the result is, we expect the current lower levels of activity to remain at least until September at the end of the holiday period.
“This has starkly increased the number of deal opportunities crossing my and other investors’ desks, where the appetite to do deals remains largely undiminished based on the underlying strength of commercial property returns as an investment class. However, there is a restricted level of supply of new stock being brought to the market, which is being further influenced by changes to SDLT (Stamp Duty Land Tax) For Commercial Property, which has increased selling costs for properties over £1.05 million.”
Total returns (all property) for the 12 months to end of February 2016 stood at 13.4% with capital value growth accounting for 7.9%. This compares to returns on equities (-7.3%) and gilts (6.8%).
Mr Matthews continues: “Commercial property returns in 2016, which are widely forecast to fall over the next 12 months but still remain above 6%, are expected to be driven by rental value growth, rather than by yield compression, so smart acquisition and active asset management will become even more important for property owners this year.
“Overall market conditions bringing more stable pricing and more off-market deals play to the strengths of Blue Marble and, as a result, I expect us to be even more active in the market in 2016.”
The Blue Marble Barometer is a quarterly forecast of the UK commercial property investment market based on current data and the direct market experience of Blue Marble Asset Management in acquiring, disposing of, and managing commercial properties across the UK on behalf of its clients. The next Barometer will be published in Summer 2016. A copy of the Spring 2016 Barometer is available from www.bmassetmanagement.co.uk.
Based in Birmingham and Worcester, Blue Marble Asset Management is a real estate asset management specialist which presently has more than £60 million of property assets under management. It works for a select range of clients including investment businesses, high net worth individuals, trusts and family offices. Its business is based on taking a holistic view of each of its property investments.