General election result and appetite for alternatives drives transaction volumes
December 2019 was the third best month on record for UK commercial property investment, with £10.2 billion transacted, a 14.6% increase on the £8.9 billion recorded in December 2018, according to Colliers International.
Medical Property Trust’s purchase of the BMI Healthcare Portfolio for £1.5 billion boosted numbers, while a sense of confidence returned to the market, encouraging a flurry of deals following the general election.
The alternative sector proved to be the most attractive in December, accounting for £3.4 billion (33%) of total investment, boosted by several high profile healthcare transactions including the BMI healthcare portfolio and the JV between Cindat Capital Management and Omega Healthcare acquiring 57 care homes for £176 million. Student housing attracted £680 million across seven deals.
Office transactions leaped up from the £856 million invested in November to reach £3.3 billion in December; 32% of the total transacted according to the firm. Several large transactions boosted numbers at the end of the year including the sale of The Post Building, London to PonteGadea Immobiliaria for £608 million and M7 Real Estate’s acquisition of a mixed-use scheme on Birmingham’s Commercial Street for £189 million.
John Knowles, head of National Capital Markets at Colliers International, commented: “December was a fantastic antidote to the rather disappointing and erratic months earlier in the year. The dominance of alternative assets is indicative of the fact that investors are still seeking growth opportunities from UK real estate. The unlocking of capital and the appetite for the stability provided by office and industrial assets will be complemented by continued appetite for the alternative sectors.”
Colliers notes that industrial assets saw investment levels of £1.4 billion in December driven by portfolio deals including a JV between Morgan Stanley and Thor Equities purchasing seven big box assets for £241 million and Starwood Capital’s acquisition of 10 urban logistics units. Retail investment reached £454 million in December, the second strongest month of 2019 and up from £254 million in November.
Overseas investors accounted for around 70% of UK investment in December, a total of £7.3bn with significant interest from a wide range of overseas buyers, including the US, Singapore, Thailand, Hong Kong and Spain.
Oliver Kolodseike, associate director in the research team at Colliers International, added: “A return of investor confidence driven by the outcome of the General Election resulted in one of the best months ever in terms of investment activity. It is encouraging that cross border investors are returning to the market, with overseas capital accounting for almost three quarters of all activity in December. There was particularly strong interest from US, Asia Pac and European investors. We expect a considerable pick-up in investment volumes in 2020, now that some degree of political certainty and investor confidence has been restored.”