Commercial Property Investment in North West on Course to Hit 7-Year High

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Posted in:Real Estate|January 27, 2015 | Join the mailing list

It’s not all about London and the South East – commercial property investment is booming in the North West too. UK and international investors have spent more than £2.1 billion in the region this year alone, overtaking 2011 levels and on track to be the highest
since 2007 – the best year of the economic boom. According to commercial property consultancy Lambert Smith Hampton, investment during the third quarter of the year was £722.36 million, a 131% increase on the same period last year. Fuelled by frenetic activity
in the North West, investment across the UK totaled £6 billion in the last quarter – the highest level since 2006.

Among the most significant investments in the region was the £75 million purchase in August of 1 Piccadilly Gardens in Manchester by Legal and General. In October, the company also snapped up the 87,376 sq ft Manchester Piccadilly Travelodge building for £23.1
million. The low initial yield of 4.8% for the sale suggests that competition was strong among investors seeking to acquire the asset. Another major investment this quarter was the £72 million sale of Robin Retail Park in Wigan to TIAA Henderson Real Estate.
Such multi-million pound deals show why the North West is one of the strongest markets outside London and the South East, accounting for one in every eight pounds invested in UK commercial property.

The North West regional head of capital markets at LSH, Abid Jaffry, said: “The North West is set to enjoy a record year in terms of returns and investment volumes. Investment in the region has escalated significantly with improved confidence on values and
the strengthening occupier markets. In addition, the returns being offered in some of the secondary markets remain attractive to investors wishing to take advantage of the higher yields and positive occupier sentiment.”

According to a recent survey of real estate professionals by Lloyds Bank Commercial in association with the
Investment Property Forum (IPF), overall confidence in the UK’s commercial property market remains high. More than 60% of respondents believe that activity will continue to increase over the next three to
six months and an equal number believe that foreign investment has had a positive impact.

The Lloyds/IPF survey revealed a slight drop in confidence after almost two years of steady growth in optimism, with an increase in the number of investors predicting that the market will begin to level out soon. However, results varied across the regions,
with London and North West-based SME property firms more confident about their own portfolios over the next three to six months than of the market nationwide.

Mark Ellis, managing director of SME real estate for Lloyds Bank Commercial Banking, said: “Both [London and the North West] have had incredibly strong years so far with occupier and investment activity continuing to rise. It’s reasonable to see more capacity
for growth in each too, particularly in the North West which is still edging past its pre-crisis peak.”

A number of factors may explain the tapering in investor confidence nationwide, including political uncertainty around the recent Scottish referendum, the prospect of an interest rate rise early next year and a renewed focus on peripheral Eurozone countries
experiencing a nascent recovery in their investment markets. However, despite a global slowing of growth and fears of stagnation, inward capital flows to the UK remain remarkably robust, as overseas investors continue to seek out prime and secure UK assets.

For more information about any of the above or for practical advice on this or any other aspect of Commercial Property, please contact
Liz Whitfield and Berg Real Estate Team on 0161 829 2599 or email us at
Lizw@berg.co.uk

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.) 

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