Sharp slowdown in commercial property activity
Commercial property activity has seen a significant slowdown amid a stand-off between buyers and sellers, according to new research.
The momentum from the summer has “stalled somewhat”, with the third quarter seeing a 45% decline in trades to c£339m. Activity for Q3 was 26% below the five year average.
In its latest quarterly review, Lismore Real Estate Advisors say: “Coming on the back of a strong post-Covid bounce, the effect of double digit inflation, rising cost of debt, war in Ukraine and the financial markets turbulence has produced an equally sharp pause for breath, and in some cases a swift adjustment in pricing.”
Lismore is anticipating that Q4 is likely to see “continued pricing volatility” and said “developers are continuing to face a challenging period as build costs remain stubbornly high and development finance gets tougher.
“As sterling has fallen against most of the major currencies (the US dollar in particular), different (overseas) buyers are emerging who can benefit from the currency play and see better comparative returns against other markets.
“We expect to see the re-emergence of North American private equity who sense there is opportunity to come. Those with deepest pockets will be first to move.
“Far Eastern and Middle Eastern investors are still in the market but refocused on more defensive stock.
“On balance UK funds are expected to be net sellers although for the right deals selective opportunistic buying is still possible.”
Retail warehousing and food stores retain investor demand given the strong fundamentals compared to other sectors with a more mixed occupational story.