Q1 2014 investment performance fell back to average levels, but remained 38% above that of Q1 2013. The fall in volume was more concentrated in Central London than in the rest of the UK.
Average lot size increased substantially in Q1, to £28.1m, the highest level since Q3 2007. The rise in lot size was the result of a higher proportion of transactions between £20m and £100m.
In contrast to the previous quarter, and reflective of the European market investment as a whole, there were no transactions over £500m in Central London. There is an absence of large lot opportunities in the capital.
Domestic investors played a more important role in Q1 than foreign purchasers, accounting for two thirds of the total. Domestic investors also acquired more in Q1 than they sold; for only the second time since 2003.
Domestic investment is being supported by increased net flows of funds into investing institutions. IMA figures show a ramp up of investment into property funds since mid 2013, a trend which is continuing in Q1.
The yield gap between prime London and prime regional offices is at record levels. This is encouraging investors to move up the risk curve and acquire more non-London assets. Prime yields have fallen in most regional markets over the last six months. We expect further compression during 2014.
Prime rental growth is expected to continue, while rents are beginning to rise in secondary office and industrials. The yield trend is generally inward for all sub sectors, more so for secondary than prime. Thus we envisage 2014 as having a very similar level of activity to 2013.
We expect investment volumes to fall 4% in 2015. The decline in relative value of the UK market will coincide with slightly weaker investment activity. Nevertheless, UK investment activity will remain high by historic standards
Source : DTZ (Groupe UGL)