DevDosh Ltd covered the circus that is the current general election and Brexit debacle has not dampend particular areas of the UK property investments scene. Commercial property is still going strong with investments in the first half of 2017 rising by 1 percent, with average prime yields last month staying put at 4.7 percent according to sources at the international real estate advisors Savills.
In DevDosh Ltd visions, over 27 Billion GBP was invested into UK commercial property, that’s one percent higher than the same period last year, with offices being the favored UK property investment of choice, with 39 percent of total investment, as far as location is concerned it was straight down the line with a 50/50 split between London and the rest of the emerald isle.
Savills says that six sectors could still see yields harden slightly by the end of 2017 (food stores, M25 offices, regional offices, retail warehouse (restricted), industrial distribution and industrial multi-lets), in spite of financial and political uncertainty, as the persistent amount of overseas investment focusing on UK property is likely to preserve current pricing. The present-day gap between yields for prime and average commercial property is at the moment approximately 160 basis points (bps), close to the 10-year average of 180 bps.
Richard Merryweather, joint head of UK investment at Savills, says: “UK commercial property is in good health, with investors continuing to be attracted by its underlying strengths, with overseas buyers additionally benefitting from the current currency discount. Indeed, volumes in H1 could have been higher, but have been held back by lack of sellers, rather than any reluctance from buyers.”
Steve Lang, director in the commercial research team at Savills, adds: “Whilst uncertainties from the various worldwide political changes may create some locallized volatility, particularly as the reality of Brexit negotiations become more apparent, the higher income returns from UK property look set to maintain its attraction with a wide pool of investors. Indeed, in June we observed that a major US pension fund is looking at a ‘build-to-core’ strategy in the UK, looking to make physical improvements or agree new leases in order to move assets into core, demonstrating the willingness for some funds to move along the risk curve in order to access UK stock.”
Savills are predicting that the total returns that can be expected for UK commercial property this year is in the region of 5.5 percent, and will continue to grow over the course of the next five years.
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