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Investment on target for record year says LSH

GleneaglesInvestment in UK commercial property is on target to set a new record this year, with overseas buyers continuing to be the largest group,  according to research by Lambert Smith Hampton.

In Scotland, investment rose to £726 million in the third quarter, up 11% on the same period last year.

Overseas investors dominated much of the activity north of the border investing £382m, while the retail sector accounted for 40% (£298m) of the total invested in Scotland.

In all 28 deals were completed in Scotland in the quarter, compared to 32 in the same period in the previous year. However, the average deal size was higher this year at £25.92m against £20.45m in 2014.

Some of the key deals in Scotland included Ennismore Capital’s acquisition of Gleneagles (pictured) for £150m; Harbert European Real Estate Fund’s acquisition of Eastgate Shopping Centre, Inverness for £116m; and the purchase of The Forge Retail Park, Glasgow by EPISO4 Luxembourg SARL for £83.6m.

Ewen White, director in capital markets at Lambert Smith Hampton in Glasgow, said: “Scotland continues to trade at a significant discount to the English regions, despite the fact we have the strongest office occupational market fundamentals since pre-recession times.

“The Q3 2015 stat is slightly misleading as 12 months ago we were in the run up to the Scottish independence referendum and as a result there was limited transactional activity. Therefore we would expect an increase in the total volume invested.”

Overall the UK investment figure of £12.8 billion in Q3 represents a 23% decline on the previous quarter – and is the third successive quarter in which volumes have fallen – although investment for 2015 as a whole may just eclipse the record of £61.7 billion set last year. Investment for the year to date currently stands at £48.5bn.

In addition, LSH’s UK Investment Transactions report reveals that investment volume in the UK regions during Q3 exceeded that in London for the first time in 12 months. This helps to explain the reduction in the average lot size from £35m to £25m, and the fact that total transaction volume fell despite an 8% quarter-on-quarter rise in the number of deals.

The report also finds that UK institutions were net dis-investors in commercial property for the first time in Q3 since mid-2012, with a number of key institutions appearing to rebalance their portfolios by cashing in within London whilst continuing to invest outside of the capital. Overseas investors continue to hold their position as the largest net buyer of UK property.

According to the report, transaction yields have fallen slightly from 5.69% to 5.55% in the past quarter, to stand at their lowest level since the end of 2007.

Ezra Nahome, chief executive of Lambert Smith Hampton, said: “We continue to see high levels of interest among investors for UK commercial property.

“Although there are signs that the market is starting to return to more sustainable levels of activity, we’re seeing a considerable stock of properties under offer, on the market or being prepared for sale. This all points to a dynamic end to 2015 and a very real prospect that investment will hit a new annual record this year.

“London continues to perform strongly and will remain the most important market for overseas investors. However, it’s encouraging to see capital flowing back into the regions in a meaningful way as investors rebalance their portfolios in response to improving confidence and the price of assets in London.”

 

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