Investment volumes in automotive property in 2015 were 25% higher than the previous year, and investors should expect increased opportunities into 2016 as operators release capital from real estate assets, according to the latest research from Knight Frank.
Total investment in automotive property in the UK totalled £440m (€566.7m), a significant increase on 2015 (£350m or €450.9m) and above the ten year average of £280m (€360.6m).
Increased consumer confidence has driven four years of consecutive growth in car sales resulting in greater dealer profitability. This will translate into significant rental increases in 2016, with rental growth for prime assets in the automotive sector set to outperform the all property equivalent for the full year at between 8-10%.
In addition, the UK automotive sector has benefitted from significant overseas investment – including by US Private Equity – which further increases the security of income, and makes this a compelling asset class for investors.
Knight Frank predicts that despite some economic uncertainty, 2016 will witness the strongest ever investment yield for a rack-rented new lease outside of London and that growth in alternatively fuelled vehicles will deliver further performance in this sector.
Adam Chapman, head of automotive property, Knight Frank, commented: “As customers move increasingly towards finance deals, the rise in car sales continues to underpin the automotive investment market. This, combined with the fundamental strength of the occupational market presents increased opportunities for purchasers in a resilient asset class as investors look to diversify their portfolios.”
This increased popularity of the automotive property sector underlined a substantial shift to the alternative asset classes by investors, with purchasers now viewing specialist sectors as a robust asset class, delivering longevity and stable income flows. Eighteen per cent of all commercial property investment transactions in 2015 were in specialist property and Knight Frank predicts that total investment into these sectors will increase by 10% y-o-y to reach £14.3bn (€18.4bn) by the end of 2016.
All four core specialist sectors - hotels, healthcare, student property and automotive - saw volumes exceed their five and 10 year averages in 2015. Since 2006, £46.6bn (€60bn) has been invested into these sectors, with a record £13bn (€16.7bn) invested in 2015 alone.
