An encouraging report into commercial property portfolios has been published by Drivers Jonas Deloitte, showing an increase in like-for-like sales in the UK market, up 33% in portfolio transaction volumes compared to 2009. In 2010, volumes totalled £6.02bn across seventy-eight portfolios, compared to £1.9bn previously.
Analysts at the commercial property and business services consultancy pointed to a lack of prime commercial property assets in the market, creating opportunities for good secondary portfolios, as well as increasing competition for existing prime assets. ‘Synergy, location bias, lot size, income weightings, sector and covenants are all crucial’ to creating a saleable commercial property portfolio, says Leo Zielinski at Drivers Jonas Deloitte.
Premium prices were reportedly paid after competitive bidding, with fund managers ‘keen to purchase a collection of reasonable quality assets in a single transaction’.
According to analysts, despite increased market activity, the risk of secondary property packages remaining unsold will continue. This is attributed to the dynamics of available discounts on the portfolios, stock availability and the pressure to acquire, meaning the debate over whether to buy or sell commercial property in bulk will continue for some time to come.
The two largest groups of vendors by volume were administrators and receivers and owner-occupiers embarking on sale and leaseback programmes, representing 28% and 23% respectively.
UK portfolio transactions were analysed throughout 2010, tracking the sale of approximately 116 portfolios (excluding those under £10m). Of these, thirty-eight didn’t sell and either remain available, have been withdrawn, or have been split up and sold in their individual parts.
This year over forty portfolios have been marketed so far, at a combined value of £1.2bn. Drivers Jonas Deloitte expects banks to increase activity throughout the year, although they are ‘unlikely to flood the market’ for fear of driving down portfolio values, with forecasts of annuity funds persuading ‘more corporates into sale and leasebacks as the weight of money to secure long secure indexed linked leases remains strong in the current market’.
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