The first half of 2018 has seen strong performance in commercial market investment across the UK, but certain regions are seeing a particular surge in popularity among investors.
UK institutions have been increasingly looking to make high-value investments in commercial property, and in particular office space, in some of the country’s regions away from London, according to a new report from Savills.
In total, the first six months this year saw investment volumes in the commercial space reach £26.9bn, which is the fifth consecutive year that the market has seen above long-term average investment levels in the year’s first half – and this year’s results are 32% higher than the average.
Investment from UK institutions into the regional office space made up 35% of all transactions, which is the highest level since 2009. According to the report, part of the reason for this growth towards the office sector is because of competition in the industrial and logistics market, which has reduced stock levels and pushed up prices. Coupled with the fact that occupier demand in regional offices is very strong, as more companies are branching out away from London, rental growth is also on a positive trajectory for investors.
Which parts of the UK are coming out on top?
Some of the strongest performing areas are Birmingham, Cardiff, Manchester and Bristol, and Real Estate Forecasting (Realfor) predicts that these regions all have strong growth prospects for the next five years, with increases of 2.1% in Birmingham, 2.6% in Cardiff, 2.4% in Manchester and 2.1% in Bristol.
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Kevin Mofid, director in Savills commercial research team, says: “With large infrastructure projects set to lead to further growth in the regions, and more people seemingly moving out of the south east, occupancy rates in regional offices are likely to remain high.”
Predictions for the rest of 2018 in the space are also optimistic, with James Gulliford, joint head of UK investment, Savills, adding: “The underlying fundamentals of the regional office markets remain robust, industrial and logistics assets are performing strongly, and the shopping sector market is set to be more active in H2, so we anticipate that 2018 will close out another strong year for commercial investment overall.”
As residential investment, as well as local spending in infrastructure and transport in these areas continues to increase, along with the transformation that will be seen as a result of the HS2 high-speed rail link, the UK’s regions are likely to go from strength to strength.