Commercial property investment across the Midlands has fallen as the ongoing Brexit impasse continues to have a negative impact on the market.
This is according to Lambert Smith Hampton’s (LSH) latest UK Investment Transactions(UKIT) report.
At £10.9bn, Q1 investment volume across the UK dropped to its lowest quarterly total since the aftermath of the EU Referendum in Q3 2016.
Heightened investor caution in the weeks leading up the UK’s scheduled exit from the EU has clearly been reflected in investment activity. £10.9bn of assets changed hands in the quarter, 26% below average and a substantial 34% below Q4 2018, the largest recorded quarter-on-quarter percentage fall in five years.
Adam Ramshaw, LSH’s regional director for the Midlands, said that in Birmingham and the West Midlands a total of £313 million of investment deals were completed in Q1, compared to £470 million in Q4 2018. Compared to the same quarter last year there was a 33% drop in investments, with a 54% decrease on the figure for Q4 2018.
Across the East Midlands, £197 million was invested in Q1, a year-on-year decrease of 67% and a 66% drop compared to Q4 2018, added Adam.
The impact was clearest with larger lot size deals. Q1 saw only 19 transactions in excess of £100m, the lowest number since Q4 2012 and significantly below the quarterly average of 31.
For the first time on record, the three traditional core sectors accounted for less than half of volume. Offices bore the brunt, with volume at a ten-year low of £2.7bn, down 60% quarter-on-quarter.
Meanwhile, retail volume sank to its lowest quarterly total on record, at just over £1bn. Industrial volume dropped to £1.4bn in Q1, far removed from the record £2.2bn in Q4 2018 but only 18% below the trend.
Ezra Nahome, CEO of Lambert Smith Hampton, commented:
“Q1 turned out much as we expected, with investors of all persuasions opting to take a backseat in the crucial run-up to the UK’s scheduled EU exit date. For the first time ever, the so-called alternative sectors collectively accounted for well over half of total volume, a telling reflection of the direction of travel in the market and the insatiable demand for long-income deals.
“While many will be relieved the UK avoided a no deal Brexit outcome, frustratingly, the EU’s extension to later in the year will only act to preserve uncertainty in the market. Despite the generally sound fundamentals of UK real estate investment, this is likely to prove detrimental to the rebound in volume we had been expecting for the latter part of 2019.”