Increasing investment in UK commercial property is expected to push prices higher throughout 2014. London will continue to be the focus of interest, particularly in the case of overseas investors, but the regional markets will also benefit as investors look beyond the capital in search of higher yields.
The forecast comes from a number of recent reports which all point towards growing confidence among investors and tenants as economic indicators suggest the recovery is gathering pace.
Professional services firm EY describes the UK as ‘leagues above’ other European countries in terms of property investment, and London as a ‘magnet for world talent’ where geographical advantages, political stability and the transparency of the market reinforce the capital’s safe haven status.
For these reasons, 69 per cent of property industry chiefs forecast that the UK market will see the highest volume of transactions this year. Spain, which has seen a flood of investment recently, was the choice of 16 per cent with Germany taking third place.
“It’s a big draw if you’re on London time and dealing with Los Angeles on the one hand and New Zealand and Australia on the other,” EY’s UK and Ireland head Dean Holdcroft told the Telegraph.
“You’re pretty much perfectly placed to be able to do business still within relatively social business hours. That’s totally different to the East Coast of the United States.”
London’s position is confirmed by figures showing that investment volumes exceeded £4.3 billion in the first three months of the year. This beats the previous first-quarter investment high of £3.94 billion recorded in 2007.
The market also performed well in terms of take-up. The figure for the office market was ahead of the five year quarterly average and in line with the ten year average, according to the EGi London Offices Market Analysis (April 2014).
The Docklands and the Southern Fringe recorded particularly strong performances during Q1, with HCA’s take-up of over 69,000 sq ft at the Shard and EY’s 205,000 sq ft at Churchill Place both among the top five deals of the early part of the year.
Indeed the London Bridge Quarter has enjoyed a strong start to 2014 with over 600,000 sq ft of office space let to date. The Shard itself, which has confirmed six additional tenants, is now half full.
Neil Prime, of JLL’s UK Office Agency, believes that the letting of the landmark building is in line with expectations.
“The strategy for the Shard has always been to attract a community of different sector occupiers at best rents, and as such we remained patient through the downturn of the market to protect the integrity of the asset,” he explains.
“With the market picking up at the end of 2013, we are seeing the expected and significant increase in enquiries and visits, and have been able to secure some fantastic tenants at the top, mid and lower levels of the building.”
Early next month the five-star Shangri-La Hotel, occupying levels 32 to 52, opens to the public. Reservations are now being taken for the 202 sky-high rooms. Prices start at £450 per night, including VAT.
