Commercial property investment hits six year high

Nick Allan

Nick Allan

Commercial property investment transactions climbed to a six-year high in 2013, reaching a total of £44.7bn, according to the latest data from DTZ.

Investment surged in the second half of the year with nearly half of the yearly total spent in the last quarter alone.

This resulted in a 31% year-on-year increase on 2012’s transaction volumes of £34.1bn.

One significant development was that more than half of the overall total (£22.9bn) was spent outside London, a reversal of the picture in 2012.

The flood of money into the regions was driven primarily by domestic investors who also increased their overall outlay to a record £24.3bn across the year.

Foreign investors spent £20bn in 2013.

Most of this – £14.2bn – was concentrated in Central London as overseas investors continued to seek prime assets, often secured off-market. However, their investment into the regions also increased.

Asian investors continued to be the biggest foreign buyers of property in 2013, acquiring about £4.6bn, mostly in Central London.

Conversely, domestic players were net sellers as they disposed of £28.7bn of property against £24.3bn of purchases, capitalising on demand for prime assets while seeking comparative value in the regions.

Nick Allan, Senior Director of Investment Agency team at DTZ in Bristol comments: “There is undoubted momentum in the market.

“Investors did well in 2013 pursuing value in the regions including the South West but the weight of investment is continuing to push down yields and is leading to lower expected returns so the window of opportunity is closing.

“We expect this to affect the relative attractiveness of UK markets especially with rising bond yields and expected interest rate rises in 2015 which could ultimately result in reduced investor interest and slightly lower volumes in 2015.”