Annual investment in regional offices and industrial space jumped 19% in 2009 to stand at £4.759 bln. (approx. 5.423 bln.), buoyed by the return of UK institutions, according to Cushman & Wakefield's new Business Briefing: Great Britain Capital Markets.
The final six months of 2009 saw an 80% increase in volumes compared with the first six months with, in total, £2.487 bln. invested in industrial and £2.272 bln. in offices. 2010 has also started off encouragingly with £640 mln. of office transactions and £285 mln. of industrial transactions carried over from 2009 and under offer or complete.
UK institutions returned to the market especially in the last four months of the year, and dominated the buying in the last half year totals accounting for 46% of office (£653 mln.) and 59% of industrial (£966 mln). Competitive bidding on prime properties meant money was subsequently chasing secondary properties, especially within the industrial sector, something the market has not seen any significant evidence off since 2007.
The South East (excluding London), the Midlands and Scotland were the principle focus for investors in 2009 accounting for £1.539 bln., £690 mln. and £535 mln. of deals respectively. Prime regional CBD office yields are now the lowest coming in to 5.75% at December from 7% at June. Prime yields for industrial property however have shown greater movement with prime regional industrial estates for example coming in to 7.25% from 9% at June.
James Leach, head of UK business space investment, Cushman & Wakefield, said: "There was seismic improvement in regional office sentiment in the second half of the year which significantly increased turnover and lead to dramatic capital growth. Whilst activity has been focused on the prime end of the market, towards the end of the year we began to see improved demand for secondary property where pricing has, in contrast to the prime market, appreciated less. With the market returning from its traditional summer recess the effects of this improvement in sentiment, lead by the UK institutions, only really took effect in September with December eventually accounting for 25% of the year's total turnover."
Richard Peace, partner UK industrial investment, Cushman & Wakefield, said: "The final six months of 2009 saw a 93% increase in deal volume over the first six months. This was largely down to the return of the UK institutions rather than a significant increase in the availability of stock. Demand is still highest in the South East for prime product but secondary stock has also started to trade as market confidence has slowly started to recover. Industrial estates have again become popular with UK institutions with some assets seeing up to 15 bids and quoting yields being beaten by up to 100 basis points. Overseas buyers have therefore been largely priced out of the market in the last six months having been prolific buyers in the previous 12 months. With many prime deals now going below 7%, these buyers have now begun to focus on other European markets offering higher returns."
Source: Cushman & Wakefield
