Investment in North East commercial property at six year high

Commercial property investment volumes across the North East reached a six year high during Q3 2013 according to Lambert Smith Hampton’s (LSH) latest research, UK Investment Transactions (UKIT) Q3 2013.

At £289.2 million, the amount invested in commercial property across the North East was its highest recorded quarterly total since pre-recession levels, reflecting the growing confidence in the region’s economy.

The driving force behind the region’s success was the Retail and Leisure sector, which remained the most heavily invested-in asset class for the seventh consecutive quarter, with transactions totalling £184.7m accounting for 64% of the total activity.

Key deals included The Crown Estate’s purchase of Silverlink Shopping Park in North Shields for £131m, reflecting a net initial yield of 5.33%, and Legal and General’s acquisition of three blocks of student accommodation and an academic facility let to Newcastle University for £86m, reflecting a net initial yield of 5%.

Private companies replaced overseas investors as the most dominant buyers in the region, accounting for 64% of the quarterly total.

Despite there being 36% fewer transactions than the previous quarter, the average deal size doubled in Q3 2013 to £32.1m, indicating a flight to quality.

Abid Jaffry, regional director of Capital Markets at LSH, commented: “The bulk of recent investments have come from large ticket acquisitions of substantial interests, although the ‘engine room’ of transactional activity with lot sizes of circa 3-5 million still remains relatively quiet.

“We anticipate that the key economic indicators which point to good property performance in regional investment will assist in encouraging further investor interest going forwards.”

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