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UK commercial property investment activity slowly recovering as levels reach £2 billion for second month running

19 08 20 UK commercial property investment activity slowly recovering hero

Commercial property investment activity is slowly recovering in the UK, but remains below levels typical for this time of the year, according to global real estate advisor Colliers International.


Analysis in the firm’s August Property Snapshot shows that around £2 billion was transacted in July, in line with the June figure and an improvement on weak figures during the lockdown months.  However, this figure is down by around 60 per cent from the corresponding 2019 figure of £5.6 billion.

Oliver Kolodseike, Deputy UK Chief Economist at Colliers International, commented: “Investment volumes in the first seven months are down by 20 per cent on 2019 levels. A pick-up in activity is expected in H2, but will struggle to reach £45 billion by year end.

“This is not a bad result, and certainly better than many were expecting at the start of downturn. It underlines the attraction of real estate as an asset class and the UK within the global marketplace, even during a pandemic. This is particularly true in the face of travel restrictions and restricted access to buildings for valuations, inspections and due diligence.

“That said, if activity fails to pick up considerably, we could be down by much more than 20 per cent by the end of the year.”

Office investment volumes broke through the £1 billion mark for the first time in four months in July, following only very limited activity between April and June when most parts of the country were in lockdown. The majority of activity was recorded in London, led by the sale of 25 Cabot Square in Canary Wharf, which was sold to Hong Kong based Link REIT for £380 million at 4.7 per cent initial yield.

Supermarkets remained in high demand, with Supermarket Income REIT acquiring a six-asset Waitrose portfolio for £74.1 million at 4.4 per cent initial yield and a 68,000 sq ft Tesco Extra on Newmarket’s Fordham Road for £61 million at 4.6 per cent initial yield. There was only limited activity related to high street shops and retail parks.

With the exception of supermarkets and offices, activity across the other main sectors was limited. Overseas buyers accounted for over half of all transactions by value. Capital from Asia Pac accounted for two of the three largest deals in July, with Hong Kong based Link REIT buying 25 Cabot Square and Singaporean Sun Venture acquiring 1 New Oxford Street, also in London, for £174 million at an initial yield of 4.2 per cent.

John Knowles, head of National Capital Markets at Colliers International, added: “While the majority of the deals done in Q2 were started pre-COVID-19, we have seen a real rise in demand from investors over the summer in anticipation of more product coming to market in September. This is particularly true of good quality office stock, long income opportunities, industrial, build to rent and social housing.”

The Colliers International August Property Snapshot also reveals that in occupier markets, industrial take up for Q2 2020 came in at 8.8 million sq ft (deals 100,000+ sq ft). This brings the H1 2020 figure to 17.7 million sq ft, 20 per cent ahead of the same period last year.

Mr Kolodseike noted that a significant amount of UK industrial space is either under offer or has strong tenant interest, and that while available supply remains well-balanced at 34 million sq ft, but this balance could potentially change quickly as we expect several larger schemes to be let over the next few months. The sector could reach another record year of take-up as a significant amount of space is either under offer or has strong tenant interest.

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Oliver Kolodseike

Director of Economics and Research

Research and Forecasting

London - West End

Oliver is Head of Economic Research and leads the quarterly UK forecasting process including the publication of Colliers' Real Estate Investment Forecasts (REIF) report. He also  authors the monthly Property Snapshot and, quarterly Scotland Snapshot. Prior to joining Colliers, he worked for the Centre for Economics and Business Research and IHS Markit. Oliver holds a BA in Economics from  Georg-August University Göttingen (Germany) and an MSc in Economics from Exeter University.

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John Knowles

Head of National Capital Markets

National Capital Markets

London - West End

A highly qualified real estate professional, John has extensive knowledge of direct and indirect real estate and finance projects in Europe and Asia.

Prior to joining Colliers, John was MD Corporate Finance at DTZ and Head of Capital Markets at LSH. He has worked extensively in distressed debt and NPL situations and has concluded transactions in the last 12 months for Cerberus, Starwood and LBG.

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Rebecca Allen

PR Manager

Marketing & Communications

London - West End

I have been working in commercial property communications for over 10 years  having previously worked at CBRE and Savills.

In my role at Colliers I am responsible for the PR of National Capital Markets, London Offices and Investment Property  Management teams as well as Scotland.

My role includes:

  • Creating and exectuing PR plans for business lines that span press, marketing and digital channels
  • Media monitoring and reporting
  • Advising on brand, tone of voice and profile raising 
  • Journalist relationship building through face to face meetings, phone calls day to day assistance with stories
  • Reputation management of the Colliers brand

 

 

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