Report finds 18% growth in property investment deals

New research has shown that the North East commercial property investment deals have grown in size to £4m over the last quarter.

The UK Investment Transactions report for Q1 2013, by Lambert Smith Hampton, found that the average deal size in the region rose by 18%.

This optimistic figure is in spite of a fall of more than 50% in commercial property investment volumes over the same period, dropping to £12m.

There were also 57% fewer transactions in the first quarter of 2013 in comparison with the fourth quarter of 2012.

The figures also show that retail and leisure remains the region’s most heavily invested asset class and that institutions are returning to the North East investment market.

Abid Jaffry, Head of Capital Markets in the North, said: “Investor appetite again remained focused on Retail and Leisure, with the total value transacted in this sector accounting for just under two thirds of all activity within the region.

“The largest deal to complete in Q1 was the sale of a retail unit on Blackett Street in Newcastle for £5.3m.

“UK institutions were the biggest net-investors into the North East market in Q1 2013, recording just over 44% of the total quarterly investment volume (£5.3m) - the largest amount invested by UK institutions since Q2 2011.”

The new report also found a fall of 25% in investment in central London offices, with the demand for portfolio and alternative asset sales filling the gap.

According to the figures there is also a return to regional activity caused by the yield gap between prime and secondary and London and the regions.

The first quarter of 2013 has seen £850m invested in portfolios of regional office, retail and industrial assets.

Ezra Nahome, CEO, said: “It is a lack of stock that is holding back investment - after high transaction volumes in Central London over the last two years we have now reached a point where the amount of stock being brought to the market has slowed.

“In addition, the high prices demanded for Central London assets may have deterred some investors, but even after a 25% drop in activity offices remains the asset class of choice and Central London offices is still the most important submarket.

“Pricing for secondary regional properties is starting to reach a level that makes the investment decision an easier one to justify than it was 12 or even six months ago.

“At present the aggressive pricing of prime Central London stock is limiting the market to mostly overseas investors.

“Now pricing has moved out sufficiently between London and the regions to alter the balance between risk and reward.”

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