Plaza and Zenith caught in post-Brexit investment slowdown

Bruntwood has failed to find a buyer for the Plaza after prospective bidders put investment plans on hold following the UK’s vote to leave the European Union.

Bruntwood put the 370,000 sq ft office building in Liverpool on the market with agent CBRE in March at an asking price of £57.5m, at a net initial yield of 7.75%. The building is 90% let to 31 tenants. Bruntwood paid £24.5m in 2003 for the landmark office on Old Hall Street.

There is understood to have been interest from potential buyers in the Plaza but no party identified as being close to agreeing a deal.

Henderson Real Estate appointed Knight Frank in March to market Zenith, the 74,000 sq ft office building on Manchester’s Spring Gardens, for an asking price of £27.3m, which would represent a net initial yield of 6%. The building was acquired in July 2011 for £24.4m. The vacancy rate has fallen from 45% to 14% since.

A deal was agreed at Zenith with Pramerica, who then pulled out after the referendum when it put purchases on hold.

However, investment agents said the market was already slowing prior to the referendum with both pricing and the volume of transactions falling. This slowdown was due to continue for the next couple of quarters and Brexit simply accelerated an inevitable correction following the peak of the market.

One agent said: “These were examples of overpriced assets valued at the peak that the market was likely to take a dim view of once the peak passed earlier this year or late last year, depending on your view. The Plaza was always a difficult lot size for Liverpool, being so big, in many investor’s eyes and Zenith is a crap building that was just not worth the price.”

Another senior investment agent in Manchester said: “There are an awful lot of deals in this situation now, we have 70 properties under offer as a firm and all are under review, there must be 200 deals like this around the country, I could name 20 in the North West. Investors are all saying they want to see how we go.”