The weight of money flowing into commercial property investments is making it increasingly hard for investors to find good value opportunities, but they should not be tempted to overpay, according to Birmingham-based specialist real estate asset management company, Blue Marble Asset Management (Blue Marble).
In the latest edition of the Blue Marble Barometer, the quarterly forecast of the UK commercial property investment market, Blue Marble questions how much further the commercial property market can go in terms of pricing and rental growth after the CBRE All Property Index revealed that April 2018 was the lowest monthly capital value growth since October 2016.
Blue Marble Chief Executive Tim Matthews says: “The outlook for the next three to six months remains Fair as investors’ appetite to invest does not appear to be impacted by any economic events. However, many agents now consider current pricing reflects top of the market performance.
“The weight of money coming into commercial property from a high level of investors who favour it to the main alternative investment classes (gilts and equities) because of its defensive nature and ‘safe haven’ appeal, coupled with a vast amount of private equity being made available for direct commercial property investment, means that investors will have to rely increasingly on their advisers to identify investments which meet their investment criteria and where they are not just over-paying to acquire income.
“The maxim – ‘stick to your principles’ is even more important in this market. There will be another market readjustment. We just don’t know when. Unlike in 2009, lenders are now better protected, with much lower loan to value ratios, so it is largely investors themselves who will bear the brunt of any losses, particularly those who have favoured income over value.”
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 and mixed use properties across the UK on behalf of its clients.