Leading commercial property consultancy Lambert Smith Hampton (LSH) has announced that commercial property investment across the Midlands has slumped as the ongoing Brexit impasse continues to have a negative impact on the market.
According to LSH’s latest UK Investment Transactions (UKIT) report, heightened investor caution in the weeks leading up to the UK’s exit from the EU has attributed to the lack of investment activity across the country.
Figures show that the Q1 investment of £10.9bn worth of assets was at its lowest quarterly total since the EU Referendum in Q3 2016, falling 34% below Q4 2018, and recording the quarter-on-quarter percentage fall in five years.
LSH’s regional director for the Midlands, Adam Ramshaw said: “In Birmingham and the West Midlands a total of £313 million of investment deals were completed in Q1, compared to £470 million in Q4 2018. Compared to the same quarter last year there was a 33% drop in investments, with a 54% decrease on the figure for Q4 2018.
“Across the East Midlands, there was [an] investment of £197 million in Q1, a year-on-year decrease of 67% and a 66% drop compared to Q4 2018.”
The national stalemate was most obvious with the lack of larger lot size deals which saw only 19 transactions in excess of £100m, the lowest number since Q4 2012.
Brexit uncertainty also saw retail volume sink to its lowest quarterly on record, with just a little bit over £1bn generated; industrial volume dropped to £1.4bn in Q1, which was far removed from the record £2.2bn in Q4 2018.
Other sectors such as hotel & leisure proved more resilient in the face of Brexit, producing an impressive volume of £2.6bn in Q1 which was its strongest quarter in 13 years.
Boosted by a number of high-profile portfolio deals as well as the UK’s largest Q1 deal by Queensgate Investments for their £1bn acquisition of the Grange Hotel Portfolio.
Commenting on the downturn, Lambert Smith Hampton CEO Ezra Nahome, said: “Q1 turned out much as we expected, with investors of all persuasions opting to take a backseat in the crucial run-up to the UK’s scheduled EU exit date. For the first time ever, the so-called alternative sectors collectively accounted for well over half of total volume, a telling reflection of the direction of travel in the market and the insatiable demand for long-income deals.
“While many will be relieved the UK avoided a no deal Brexit outcome, frustratingly, the EU’s extension to later in the year will only act to preserve uncertainty in the market. Despite the generally sound fundamentals of UK real estate investment, this is likely to prove detrimental to the rebound in volume we had been expecting for the latter part of 2019.”
Featured Image: LSH regional director Adam Ramshaw