Secure index-linked returns attracting investors to alternative sectors
The combined alternative, mixed use and leisure sector accounted for 45% (£633 million) of all UK commercial real estate investment in January according to Colliers International. The total invested in January was £1.4 billion, down from the £3.3. billion invested in January 2019.
The largest deal in the sector was the sale of a two London hotel portfolios, comprising The Sanderson and St Martins Lane Hotel, for £255 million to Vivion Investments. Invesco Real Estate’s forward funding of Aubrey Place in Milton Keynes, a build to rent unit scheme of 294 apartments set to complete in 2022, was the largest private rented sector deal in the month.
Tim Meakes, director in the national capital markets team at Colliers International, commented: “The alternative sectors are increasingly becoming mainstream as they attract significant capital, providing investors with the secure index-linked returns they are seeking. We are seeing a flight to quality and location and London, the major regional cities, and the south east are the most popular.”
As a singular asset class, offices attracted the largest share of investment coming in at £563 million across 33 deals. The largest deal was the sale of Bedfont Lakes business park in London to Fraser Property at £135 million. London saw £482 million of office transactions, compared to £81 million outside of the capital.
Oliver Kolodseike, associate director in the research team at Colliers International, added: “Following an excellent December in which we saw £10.2 billion invested, January volumes look particularly low, however it is important to bear in mind that the first month of the year is historically muted and we expect levels to rise in the first half of the year. It’s no surprise offices continue to attract the most investment, providing a sense of stability particularly for overseas investors.”