Lambert Smith Hampton’s Q3 2013 UK Investment Transactions report shows that investment in UK commercial property hit a six year high in the 3rd quarter of 2013. The full report can be downloaded here
At £11.6bn, quarterly investment levels are 50% above the post-2010 market average, and 40% up on the Q2 total of £8.24bn. This rise has come off the back of a big increase in deals for London property, which topped £7bn this quarter, and growth in regional investment volumes, which are at a two and a half year high.
Central London offices still in demand
Investment in London was driven by demand for Central London offices. Despite London’s relative expense, quarterly investment increased to almost £5bn, which was more than double the amount transacted in the first quarter of the year. The market had seen something of a pause in the first six months of 2013, which now looks to have been liquidity related rather than the result of a decrease in investor interest.
Regional investment at a high
Regional investment levels in Q3 are the highest they have been since Q1 2011. Total investment was £3.71bn, a 14% increase on the Q2 figure of £3.24bn. Improvements in the economy has opened up new parts of the market and investors who have funds to deploy are now ready to take on more risk.
Overseas investors are biggest buyers of UK property
This quarter, overseas investors purchased £4.16bn of UK property: the highest total since Q2 2012. The biggest sources of investment were the Far East, followed by Germany and North America, where the private equity houses are becoming more active in direct property deals.
UK investors to play a bigger part?
However, the early indications are that UK investors are ready to play a larger part in the market. The major UK investors were responsible for 55% of the quarterly investment total: a 15 point increase on the 2012 average. A combination of the improved economic outlook, which is unlocking new parts of the market, an easing in the availability of debt and greater in-flows into the institutions is encouraging the major UK investors to take a greater share of activity. We expect this continue through to the end of the year and beyond.
