Investment market to pause after active Q2
Lambert Smith Hampton’s quarterly research into the market for investment in UK commercial property shows that activity in Q2 2010 reached its highest for the past two years, with turnover of £8.3bn and 15 deals of more than £100m completing during the quarter.
Overseas investors were the most active during the quarter, accounting for nine of the 20 top positions in LSH’s most active buyers index. LSH chief executive officer Ezra Nahome said that the market had become more broadly based in recent months, with several sources of buying activity returning to the market. “The greater variation of buyers must bode well for the coming months, in what we believe will be a more challenging market.”
LSH expects the market to go through a period of consolidation now as it finds its new level. Transaction yields have fallen by an average of almost 150bp, with the retail warehouse and distribution sectors seeing adjustments of up to 250bp, and investors need time “to become comfortable with the new yield regime”, Nahome said.
Nahome added: “The austerity package instigated by the new government has made investors unsure about the prospects for the recovery in the economy. The early signs from the equity market showed nervousness but property remains an attractive asset class and, with running yields of almost 6.5%, compares favourably with the return investors can achieve by investing their cash in the equity or bond markets.”
“The market may have come a long way in a short period of time but this has arguably been too much too soon and further improvement will be harder to achieve for the remainder of the year.”
