March investment volumes reached £4.5 billion, up from £3.9 billion transacted in February according to Colliers.
The Q1 figure therefore stands at £13 billion, up 10 per cent on the corresponding 2021 figure and in line with the 10-year Q1 average. Cross border capital accounted for almost 60 per cent of all activity during the quarter. US and Asia-Pac investors were particularly acquisitive as the easing of travel restrictions is bringing global capital into the UK market.
March's three largest deals by value were London office 5 Broadgate (£1.2 billion), a logistics portfolio (£550 million) and a student accommodation portfolio (£306 million). Yields are compressing across most sectors, especially for prime assets in prime locations.
Oliver Kolodseike, head of Economic Research at Colliers, comments: “The first quarter of the year has seen investment levels largely get back to pre-pandemic levels across the various sectors. The current headwinds of inflation, interest rates and the rising cost of living will no doubt have an impact on the Q2 features, particularly for retail as demand for goods may drop. Despite this, there is a significant weight of capital looking to enter the UK real estate market and I’d not expect there to be a drop off in investment levels this year.”
Just over £2 billion was transacted in the office sector during March, building on the £2 billion and £1.2 billion recorded in January and February, respectively. Excluding traditionally strong fourth quarters, the £5.2 billion transacted in Q1 was the best quarterly figure since 2018. By far the largest deal by value was CK Asset Holdings’ £1.2 billion sale of 5 Broadgate, EC2; the UK’s largest office transaction since 2017. In the largest office deal outside the capital, Immobel took a 50 per cent stake in White Rose Office Park in Leeds for £110 million, reflecting a yield of 6.75 per cent.
Around £1.3 billion was transacted in the industrial sector in March, up from £1 billion in February and higher than the large majority of any monthly figures pre-Covid. The four largest deals were all portfolios, led by Cain International’s purchase of a seven site Grade A logistics portfolio for £550 million. Industrial pricing is firm with yields still compressing. A number of assets traded at sub 4 per cent.
Monthly retail investment volumes slowed from an already weak £300 million in February to just £170 million in March, the weakest monthly figure since April 2020. Nonetheless, the Q1 figure of £1.4 billion is an improvement on both 2020 (£1.1billion) and 2021 (£1.2 billion) levels thanks to a strong January. The largest March deal was the £60 million sale of Aberdeen’s Beach Boulevard RP to US REIT Realty Income at circa 6.25 per cent initial yield. A number of smaller high-street shops changed hands, but no shopping centres were traded.
Around £930 million was invested in the alternative and mixed-use segments in March, down marginally from the £1.1 billion transacted in February. The purpose-built student accommodation (PBSA) sector attracted £430 million, up from £260 million in the previous month. The largest deal in the sector was Lone Star’s £306 million acquisition of an 11-asset portfolio with just under 4,500 beds, reflecting a yield of 5.7 per cent.
Paddy Allen, head of Operational Capital Markets at Colliers, added: “Investment into PBSA almost doubled between February and March as the sector continues to be popular with global capital looking to increase exposure to ‘beds’ backed sectors. We are seeing increasing levels of dry powder looking to build scale across PBSA and Build to Rent, with the resilience and favourable demand and supply imbalances continuing to make PBSA a primary focus for investors.”