UK real estate investors stayed cautiously positive in the second quarter of 2011 as UK prime property continued to capture interest, according to the latest Jones Lang LaSalle UK Investor Confidence survey.
This is despite Q2 2011 UK investment volumes falling 24% over the quarter, following a stellar Q1 2011 performance that was boosted by the £1.6-billion Trafford Centre transaction in Manchester.
Investors do not expect the current tight supply market conditions to change, with 43% of respondents anticipating an excess of buyers over the next 12 months, up from 42% in Q1 2011 and 34% in Q2 2010. However, investors appear to be more willing to look outside London as only 56% expect their new activity to be in London and the South East compared with 69% a year ago.
Robert Stassen, Head of EMEA Capital Markets Research at Jones Lang LaSalle, noted: "Whilst there has been a widening disconnect between investment activity in Central London and the rest of the UK over the first half of 2011, key city center and town center locations are beginning to enjoy a surge in interest from domestic investors, particularly for retail assets.
"However, this is yet to be translated in to transactions as regional investment volumes are still relatively low."
There was no material change in planned activity for the next 12 months with 73% of respondents expecting to be net buyers, up marginally from the 70% recorded in Q1 2011.
Continued growth is expected in the second half of 2011, but investors might be moving down the risk curve with an increased percentage opting for less risky (core or core+) strategies (48% vs. 42% in Q1 2011), while the percentage opting for higher risk value added strategies dropped to 36% from 42% in Q1 2011, while highest risk opportunistic strategies remained at 16%.
Stassen concluded: "These results underline that, despite the constraints on suitable prime investment grade product, investors still appear reluctant to explore opportunities within the secondary market, but might be considering better quality assets outside the London market".
Source: Jones Lang LaSalle