Office and Industrial Sectors Lead the Way as UK Property Market Continues to Attract Investment

According to the latest data from Savills, unveiled in the real estate company’s February Market in Minutes Report, the UK commercial property sector has remained strong due to continued investment from foreign parties. These overseas investors clearly still see value in UK property despite the uncertainty to arise in the wake of the Brexit vote, which is sure to be a weight off the shoulders of many of the UK’s property owners and business leaders.

The aforementioned report shows that investment in UK commercial property rose by as much as 66% in January as compared to the same month last year, reaching a figure of £4.2 billion. Likewise in 2017, total investment into UK real estate reached £65.4 billion, representing a 26% increase on 2016’s annual total. Average UK prime yields remained static in January at 4.52%, around 30 basis points lower than the same point in 2017.

According to Savills, the office and industrial sectors bolstered the market heavily with overseas investors responsible for nearly half of total volumes, of which Asian investors were the most active, accounting for a fifth of all investment.

Mark Ridley, CEO of Savills UK and Europe, commented, “January’s volumes demonstrate that investors are still looking beyond Brexit and are happy to commit to the UK to secure prime property with secure income characteristics. Based upon current projections, driven by a downward shift in equivalent yields, we expect total returns for average UK commercial property to be around 7% this year before weakening slightly for some of 2019 as investors take a ‘wait-and-see’ approach as the UK officially leaves the EU.”

Steve Lang, Director of Savills’ Commercial Research Team, added, “This February marks the 10-year anniversary of the first Market in Minutes in 2008. Back then, average UK prime yields rose by over 120 basis points during the year, development activity indicators had slumped and GDP expectations were slashed. Compared to this, the impact of the Brexit vote is relatively mild. In addition, you would have been hard pushed in 2008 to have predicted the explosive growth in online shopping over the past decade which has largely driven occupier demand, and therefore investor appetite, for industrial space.”

Sam Bonson

Sam is an aspiring novelist with a passion for fantasy and crime thrillers. He is currently working as a content writer, journalist & editor as he continues to expand his horizons.