UK commercial real estate investment volumes for 2020 to the end of April 2021 is now just 22% down on the equivalent period last year, at £13.7bn.
According to industry research, this year’s monthly investment volumes are showing a steady recovery and are within 10% of normal levels. The UK all-property prime yield remains stable at 5.20%, although some properties are still seeing a downward trend and now stand 75 basis points lower than in September 2020 at 6%. Since then, many sectors have seen significant investor activity this year, with industrial investment volumes to the end of April 2021 up by 110% to £4.1bn and retail warehousing activity up by 87% to £841m.
Data collected from Google Mobility, a software used to track movements of people around the UK, was used to see the publics activity since the easing of lockdown restrictions in 2021. This data indicated that there is a sharp spike in the public’s eagerness to leave home. These metrics show that the volumes of returns to retail and recreation, mass transit and workplaces reached the same level in two weeks as it did in two months during 2020.
It has been forecasted that in Q2, we will see investment volumes steadily climb, which mirrors the easing of lockdown restrictions and the progress of the vaccination programme. The main questions some property investors have asked has been around consumer behaviour and the return to work, data suggests that the resumption of normal levels of footfall in retail locations and workplaces could come a lot sooner than expected. If these statistics are correct, then investor confidence in retail and office spaces will continue to improve in Q2, to the extent where overall levels of commercial property investment could be back to normality by the end of the year. While retail has had a huge boom, the uncertainty of whether this will continue remains.
Mark Richardson, Partner at BB&J Commercial commented “like many businesses emerging from the effects of the last year or so, we remain mindful of what many have been through and understandably are cautious in predicting what lies ahead. Nevertheless, we have been exceptionally busy throughout, and this news supports our own optimism that the industry is very much on course for a significant rebound.”
Graham Bancroft, Partner at BB&J Commercial added “the office market is far from extinction, we are seeing a huge increase in enquiries for office space since the turn of the year with numerous deals having also been agreed. Not only are we pleased to have moved office and returned to work in such a turbulent time, but we are also glad to see people having the same optimism and investing in commercial property again.”
Another area to consider from the last year is whether tenants will pay more for ‘green’ buildings post-COVID, and whether there will be a jump to such investments in the future. However, with most new office buildings being designed to achieve high BREEAM ratings, there are few ‘non-green’ buildings to test against. With that in mind, if property investors wish to achieve top rent in most UK office locations, a high BREEAM rating is becoming more essential, therefore making it attractive to buyers due to its strong income returns.
Are you looking to invest in commercial property? Here at BB&J Commercial we have an experienced team of property experts who are here to help every step of the way.
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