In difficult economic times it falls to commercial property investors to seek out demand wherever they can and whenever they can.
The role of mergers and acquisitions as an answer to commercial property demand is an unusual one to consider but nevertheless can provide some fruitful indicators of what exactly is happening in the commercial property market.
There had been some signs from analysts that mergers and acquisitions activity would increase as time progressed; however, volatility in the stock markets in recent months led city agents to question where the demand for commercial property was going to come from in the second half of 2011.
It’s interesting to note, then, that Experian’s Mergers and Acquisitions research, released last month, shows that the volume of deals is down for the first half of the year compared to the same period last year. Whilst the value of transactions increased by 7%, the actual volume fell 15%, with the majority of UK deals with the USA primarily, and then Germany. The USA suffered a staggering 37% fall in the volume of mergers and acquisitions, clearly causing a knock-on effect in the UK and subsequently affecting the commercial property market.
Wendy Smith at Experian Corpfin says: ‘The first half of 2011 shows that there is still a degree of tentativeness in the market. This is further impacted by the fact that there are fewer business insolvencies to create opportunities and liquidity in the market and, to some extent, the fact that vendors still have high expectations on price.’
There are exceptions to the general decline in volume of mergers and acquisitions in the UK. ‘The North West and Wales are the only areas that appear to be bucking the trend at the moment, with both seeing slight increases in the volume of deals,’ adds Wendy.
It remains to be seen as to whether this will lead to increased take-up in commercial property in those areas. Manchester, for example, has seen commercial property take-up decline slightly during the first half of this year compared to last, though it should be remembered that the commercial property market in Manchesteris not representative of the North West market as a whole. Similarly, Cardiff’s take up for the first half of 2011 was slightly less than half the total for 2010.
Mergers and acquisitions activity is not the be all and end all of commercial property and office market demand around the country but it may make interesting reading to track the volume of transactions against the take-up for commercial property over the coming months.
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