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REPORT: UK Commercial Real Estate Investment Delivers Impressive Results

New data from global real estate firm Cushman & Wakefield has revealed an impressive upturn in the fortunes of the UK’s commercial real estate sector.

According to the details of Cushman & Wakefield’s Q4 2019 UK Capital Markets Briefing, the sector recorded £17.6 billion worth of asset transactions in the final quarter of last year.

Commenting on the levels of investment Greg Mansell, Head of UK Research & Insight at Cushman & Wakefield, said: “The appetite for alternatives and development opportunities highlights how investors are looking beyond core investment and the main sectors to achieve their goals.

“Entity-level deals and large portfolios are driving much of this increase, as they did throughout 2019. It also shouldn’t be missed that retail volumes picked up in the fourth quarter at £1.9 billion and has been further evidenced in early 2020 by an uptick in investment activity. This increase is a reminder that liquidity in the retail sector can improve if asking prices are realistic.”

[Click to Enlarge] Investment Activity (Type) – Source: Cushman & Wakefield
Despite CBRE outlining higher returns in the Industrial sector, the Office proved to be the most popular in terms of investment over quarter four, with deals significantly higher than all other commercial property types.

London offices unsurprisingly saw one of the largest investment activity of all sectors following the general election.

Buoyed by several potential buyers still searching for assets, as well as strong competition for space among occupiers, Cushman believes that London offices could prove to be the top-performing investment sector this year.

However, excitement for the office sector in the wake of post-Brexit should be tempered as the volume of leased offices is slowing considerably.

Away from the capital, the Leeds office and West Yorkshire industrial markets proved equally impressive.

Commenting on the outlook for Leeds, Richard Brooke, Partner in Cushman & Wakefield’s Capital Markets team in Leeds, said: “Regional transaction volumes increased in Q4 2019, a trend we see continuing into 2020.

“Occupational dynamics in both the Leeds office and West Yorkshire industrial markets are the strongest I have ever known, primarily driven by an acute lack of Grade A availability. For this reason, I expect our region will be the focus of strong investor activity in 2020.”

Despite the political uncertainty having an impact in terms of the total investment sales volume (£56bn vs c. £80bn in 2018), there were still a series of major deals that took place.

Significant sales of Q4 – Source: Cushman & Wakefield [Click to enlarge]
As shown in the image above, the largest deal was for the Unite Students REIT’s purchase of the Liberty Living Group portfolio.

Valued at £1.4bn, the deal created a combined student housing platform of 73,000 beds across 173 properties throughout the UK. While the sale was initially announced in July 2019, it was only approved by the UK Competition and Markets Authority (CMA) in November.

Other major transactions include Student Castle’s £448m portfolio sale to Singapore Press Holdings as well as the £602m purchase of The Post Building by the Spanish investment firm, Pontegadea Immobiliaria – owned by Amancio Ortega, the founder of the fashion chain, Zara.

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