In its October Snapshot report, real estate advisory firm Colliers International highlighted a notable rise in commercial real estate investment, with transactions reaching £3.2 billion in September 2020. According to the company, this figure was the highest on record since March 2020 when lockdown restrictions curtailed economic activity for much of the second quarter of the year. Colliers also noted that investor activity was spread across most asset classes, with the rental sector standing out among them.
In commenting on the report, Deputy UK Chief Economist at Colliers International Oliver Kolodseike said that yields remained firm across asset classes, except for retail and leisure segments. These were among the hardest-hit during the coronavirus pandemic, even though the retail sector had started to record activity in the third quarter. The office sector was also highlighted as having reached £700 million in investments in September, a figure likely to be surpassed in October.
The positive trend was also noted in Scotland where Colliers International’s Q3 Snapshot showed a market turnaround to the tune of £477 million in investment activity, up from £35 million in Q2. According to Mr Kolodseike, the improvement in Q3 gave hope of a strong end to the year in Scotland as the economy looked to bounce back from low activity in Q2, also dubbed the ‘COVID quarter’.
For commercial real estate investors such as Zuneth Sattar, the news of positive growth in the sector could be the encouragement needed to keep the activity going. Mr Sattar has a particular investment interest in office buildings and warehouses for future development and is keen to grow these as part of his business.
Colliers International’s October Snapshot provided an in-depth look at investments across the major real estate classes, including:
- Retail: Investment in retail assets reached around £550 million in September, a marked improvement from £150 million in the previous month. There was strong interest in retail warehouses, with over half of all retail investment attributed to this demand. The £47 million purchase of a Tesco in Corby by a private investor was the largest supermarket deal during the month.
- Offices: While the £700 million invested in September represented growth from the £370 million transacted in August, it was still below the monthly average of £1.5 billion witnessed in 2019. By value, the largest deal in September was the £150 million acquisition of Nine Elms Park by Quadrant Estates.
- Industrial: A little under £1 billion worth of investment in the industrial sector was recorded in September, which was a 40 percent increase from the monthly average of £640 million witnessed in 2019.
From an occupier perspective, housing activity picked up in August as more home buyers took advantage of the stamp duty holiday to conclude transactions. August also showed an increase in mortgage approvals, and overall property transaction also saw an increase in the month.
A Strong Finish
Buoyed by the stamp duty holiday, property website Zoopla expects that many residential investors and buyers will rush to complete deals, portending a busier December than any seen before. This spike is likely to continue into early 2021 as buyers aim to close deals before the end of the stamp duty holiday on the 31st March. Beyond this date, demand is expected to slow down as interest is likely to dissipate.
Five major trade bodies came together in early August to call for the introduction of a Property Bounceback Grant by the UK Government to boost activity in the hospitality, leisure, and retail sectors. The grant is intended to address the rent crisis in the affected sectors by having the UK Government invest in the short-term to help landlords and businesses affected by the pandemic. According to an analysis by the trade bodies, government support of up to 50 percent of unpaid rents for six months would result in significant tax revenue to the Treasury and save hundreds of thousands of jobs.