Commercial real estate volumes fell in the UK in 2018, but up on three year average
Commercial real estate investment volumes in the UK fell by 5.7% year on year in 2018 to £62.1 billion, a new analysis report shows.
But real estate has performed remarkably well compared to other global asset classes, according to the market in minutes report from real estate firm Savills, with industrial assets showing 12 month returns of 17.4%.
Richard Merryweather, joint head of UK investment at Savills, pointed out that 2018 year on year total volumes may have been down, but they were still up on the three year rolling average of £59.8 billion.
‘Given the continued political uncertainty around Brexit and the cooling of some global economies, together with the broad range of investors across the sectors and regions, this should be seen a strong message the UK real estate remains a liquid and desirable investment,’ he said.
Savills says that any weakening of Sterling will have an impact on investment in the coming months, but the fundamentals of UK real estate remain strong. It could also attract more international investors looking for opportunities to buy UK assets at a discount.
On this basis, with little risk of over development in many sectors and occupier demand in most markets at surprisingly high levels, the international real estate advisor says it expects that 2019 should see certain sectors continuing to perform strongly this year.
‘Alternatives and mixed-use assets accounted for 29% of all UK investment last year, the highest proportion ever, but interestingly, given the positive news surrounding the industrial market, the volumes and market proportion accounted for by this sector declined year on year,’ said Kevin Mofid, head of industrial research at Savills.
‘This is due to the creation of prime stock which is dominated by a handful of companies who hold assets for income, rather than trade, so it’s difficult to see how investment volumes in the sector can increase by the same proportion as occupier demand this year,’ he added.