Walter Boettcher, London-based chief economist for Colliers, led the speakers at the South West Banking Advisory Breakfast Briefing, which was organised by Abby Pugh, head of Valuation in the Bristol office of Colliers.
He told a packed conference room of more than 50 commercial finance experts that the South West was benefitting from the “truly phenomenal” global weight of capital that is presently serving as a defining force for commercial real estate.
“Total funds under management by institutions, sovereign wealth and private equity funds has climbed to $73 trillion representing an increase in allocation to property from 10.0% of all funds in 2017 to 10.3% in 2018. This continues to support commercial real estate prices across the UK.”
“Institutional demand, alone, continues to outstrip the capacity of markets to deliver standing assets. The days of straightforward ‘balance sheet’ investment achieving high returns, have run their course, and finding new alternative or innovative opportunities is the new challenge – not least because developers are still reluctant to build speculatively and finance for such development remains limited.”
Mr Boettcher’s message was underlined by detailed sector reports for the South West presented by Colliers’ industrial, office, investment, retail, automotive and destination teams.
These showed that the underlying fundamentals of the industrial and office markets remained particularly strong, with both only being constrained by lack of supply.
Industrial supply levels in the South West are presently at an all-time low of under 4% of total stock and a 100% increase of land take-up on the previous year. Meanwhile, the Bristol city centre office market has breached the £30 per sq ft barrier in the city centre, with £32.50 per sq ft being achieved and further increases anticipated.
An increasing number of foreign investors are now targeting Bristol, with 58% of commercial property investment coming from overseas investors last year, with UK institutions accounting for a further 26%, property companies 11% and private investors 5%.
Afterwards Abby Pugh said: “We were delighted to be able to deliver a presentation with, on the whole, a very positive tone, for commercial property in the South West.
“Capital values are increasing, and the region – particularly Bristol – is becoming the focus of increasing demand from investors, including cross border investment.”