De Villiers Commercial Property Market Summary

Despite current economic sentiment being affected by the uncertainty of Brexit the commercial property market appears to have remained resilient and the fundamentals of solid investment are now proving to ring true.  This aspect is particularly highlighted in the commercial auction market where 2018 saw investors generally acquire quality.

Allsop reported that 2018 saw £581 million raised from 861 lots with an 85% success rate.  There’s strong demand for well-let quality retail assets and alternative investments such as convenience stores and medical/dental practices with others citing hotels and build to rent residential also currently in favour.  Overall retail yields eased out to 8.3% with A-grade assets remaining steady at 6% and underlying the long term-appeal of the sector.  The trend however continues to move away from risk.

Despite the current retail gloom retail investment reflected the highest proportion of total assets sold during 2018 at 73% increasing from 65% average for the previous four years.

Foreign investment for larger prime investments in central London has led Allsops auctions to a positive year from UK commercial property investment in stark contrast to the current uncertainty with perhaps most notably the Singaporean investor Pacific Eagle acquiring Belstaff House on New Bond Street, W1 for £180m reflecting a 3% yield.  Reuben Brothers also boosted the London spend with the acquisition of Burlington Arcade, W1 for £297m reflecting a 3.9% yield.

CoStar reports that at £54.4bn volumes in 2018 were marginally down on 2017 but are 13% higher than the 10 year annual average.  With a generally quieter than normal Q4 it is considered that activity will likely remain subdued in the opening months of 2019 with a potential rebound in the second half of the year.

 

By Philip Treadwell

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