LSH: NW 2014 investment exceeded £2.6bn
Investment in the North West commercial property sector totalled £522m in the final quarter of 2014 bringing the total for the year to in excess of £2.6bn, a 51% rise on 2013 and the highest annual total since 2011, according to research by Lambert Smith Hampton.
Investment during 2014 peaked in the second quarter with significant deals including M&G Real Estate's acquisition of RBS blocks 1 Spinningfields Square and 1 Hardman Square in Manchester for £320m, LaSalle Investment Managers' purchase of Golden Square Shopping Centre in Warrington for £141m, and Schroder Property Investment Management's acquisition of City Tower in Manchester for £132m.
The demand for offices remained buoyant in Q4 with office sales of 4 Hardman Square to Orchard Street for £31.02m and Peter House, Oxford Road to Rockspring UK Value Fund for £23.7m.
The highest value deal across other sectors was at Omega South, Warrington, where LondonMetric forward funded a prelet shed for The Hut Group for £47.5m.
Lambert Smith Hampton's UK Investment Transactions report revealed that investment in the UK regions increased by 41% to £21.1bn for the year as a whole, the second highest figure on record.
LSH said the increase was primarily the result of the resurgence of UK institutional investors, which increased inflows by almost 30% in 2014 buoyed by improving economic sentiment beyond the capital.
Overseas investors continued to be the largest buyers of UK commercial property, with investment from the US more than doubling year-on-year and interest from the Far East also increasing significantly. Overseas investment in the North West at £354.4m accounted for 10% of all overseas investment in the UK in 2014.
Abid Jaffry, director and regional head of capital markets at LSH, said: "The commercial property investment market enjoyed an outstanding year in 2014 with the highest total investment since 2011. Transactions have more than doubled compared to last year which reflects the increasing momentum in investor appetite, especially in the regions. We expect momentum to continue into 2015 with investors looking at alternative sectors and good quality secondary assets.
"While the headline numbers may invite comparisons with the last boom, there is an important difference this time: investors are now considerably less reliant on debt finance. As a result, our forecasts point to transaction volumes returning closer to trend levels in 2015. The uncertainties surrounding the forthcoming General Election may also serve to dampen activity.
"Against the general trend of a softening in investment volumes, expect the so-called 'alternative sectors' – such as healthcare, student accommodation and the private rented sector – to be major growth areas. Investors will also move up the risk curve to make the most of secondary opportunities, and those with in-depth market knowledge are going to be in the strongest position to capitalise. Values should continue to rise over the next 12 months for good quality secondary assets – but at a much slower pace than that seen recently. Moving forward, the main driver of returns will be income generated by the continued rental growth prospects in the occupier markets."
