Overseas investors’ appetite in commercial property remains strong

Alex Tross of Lambert Smith Hampton. 

Britain is still attracting huge investment in commercial property by overseas investors, with more than £13.5bn of transactions recorded in Q2.

That’s according to national commercial property consultancy Lambert Smith Hampton (LSH) which recently hosted its Annual Real Estate Advisory Forum in Birmingham.

Adam Ramshaw, LSH regional director for Birmingham and the East Midlands, said that the number of deals in Q2 was up by 13% on the average. There had been a flight to quality, with investors becoming risk averse and looking for security of income. There remained an “almost insatiable” appetite for industrial/warehouse investments, he said.

Despite the uncertainty surrounding Brexit, the UK is still seen as a safe haven and a hotbed for investment, he added, with almost half the deals done by value concluded by overseas investors.

“By the end of the year we expect investment levels will be at around £55 billion to £60 billion. There is intense competition for secure income, but some uncertainty around the strength of the secondary market. Retail faces the biggest challenge and there may be some pain to come in that market. The most confidence is in the industrial market and that will continue for some time,” added Ramshaw.

Office agency director Alex Tross said there had been mixed fortunes for cities and offices across the Midlands region, with Birmingham continuing to set the standard.

While Birmingham is experiencing an upswing in activity, with 587,000 sq ft of office accommodation being built and 360,000 sq ft of that already pre-let, Coventry may lose opportunities to attract companies due to a lack of Grade A office space and no new offices being built.

Outside London, Birmingham is leading the charge in the provision of serviced offices. “Birmingham has seen the fastest growth outside London in terms of the launch of new businesses, with 80% growth since 2010. New businesses typically gravitate towards serviced offices, and they are finding a much greater range of choice in the city as providers take up traditional office space, such as Somerset House where five serviced office providers were keen to acquire the 47,000 sq ft of space,” said Tross.

“This could represent a threat to landlords of office buildings in the city. More young people are coming to Birmingham from London than any other city. The challenge is to provide them with aspirational office space, that is attractive to work in and makes employees more productive, by copying what the services office sector is providing. Landlords need to compete effectively or risk losing out.”

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