The Commercial Property Investment Market 1st Qtr 2011

‘Investors in the UK commercial Property market have started 2011 cautiously despite 2010 showing more investment activity than in the previous couple of years.  Since the beginning of the year, there has been a lack of prime stock coming to the market and prices have been high which has lead many investors to look more widely.  Secondary investments are being considered more often by investors than before.   2011 is likely to see a greater focus by investors on those secondary properties which are let on long leases to sound tenants”

 “The banks are still playing a major role in the UK commercial investment market.  They are expected to continue with a program of disposals as they re-adjust their loan books.   There is still concern that this may depress capital values especially for secondary properties.   However I do not envisage that there will be a sudden increase in the availability of investment properties in the market as the banks are keen to ensure that the market does not become flooded.  However the volume of proprieties that the banks are looking to sell could have an impact of the potential for capital growth” 

The major factor affecting the investment market is the lack of bank funding for commercial property investment and therefore the outlook for the next twelve months is uncertain.    Many investors are now looking to investment properties which offer opportunities to add value through active asset management.

One thing is for sure thing, the investment market varies widely from location to location.   The retail market continues to be the top performer due to the performance of shopping centres with retail warehouse parks performing in-line with the all-property average.  The 170,000 sqft Ocean Retail Park, Burrfields Road, Portsmouth has just been sold to The Crown Estate for £61m.  Town centres however offer a very mixed picture with some centres performing very well, such as Winchester where rental levels have recovered with no vacant units in the main pedestrianised High Street.   Other High Streets are struggling still from the difficulty in lettings shops previously occupied by the likes of Woolworths.

The office market also varies very considerably.  The London Market is performing well whilst some of the provisional office markets are being affected by their vulnerability to the public sector cutbacks and higher number of empty properties, some of which have become very difficult to let.

There are pockets of out-performance in the office market.   This has also been witnessed in Winchester where landlords are prepared to speculatively refurbished offices.   The 6,500 sqft office building, St Swithuns House in Winchester, has been relet immediately upon completion of its speculative refurbishment to an expanding Winchester company.  The strength of the office market is further witnessed by the speculative refurbishment which has just commenced of a 9,746 sqft office building, Athenia House, close to the railways station in Winchester having been vacated by the County Council and is now being marketed by Pullen Associates and will be available for reoccupation in the mid summer 2011.