West Mids property investment volumes belie ‘brexit’ concerns
Fears that the forthcoming EU referendum could destabilise the West Midlands’ booming commercial property investment market have proved unfounded.
According to latest statistics from Knight Frank, not only is the region bucking the national trend, investment volumes in Q1 of 2016 are ahead of those at the same time last year.
Nationally, volumes are down 27 per cent from £18.5 billion in January – March 2015, compared to £13.6bn in the first quarter of this year.
But in the West Midlands, Knight Frank reports a rise in investment levels from £1.02 billion in Q1 2015, to £1.1 billion in the same period this year.
Ashley Hudson, who heads the Birmingham office of Knight Frank and the capital markets team, said:
“The doom-mongers widely predicted that fears about Brexit would halt commercial property investment in the regions.
“In Birmingham and the West Midlands this simply hasn’t been borne out.”
Among the headline deals completed in the first quarter of this year were Hammerson’s £335 million acquisition of Grand Central in Birmingham, and M&G’s £200 million commitment to fund Three Snowhill.
However, whilst investment volumes across the region have been maintained, Ashley concedes that some investors have got the ‘jitters’.
“We have seen a pause in overseas investment as people await the outcome of the vote in June. The UK institutions are also adopting a watching brief, and only investing in defensive long term stock.”
According to Ashley, of the deals that are progressing, some are the subject of so-called ‘Brexit clauses’.
“Some of the deals have been made contingent upon the outcome of the referendum. I’ve not seen anything like this in 20 years of providing commercial property investment advice.”
However, he maintains that whilst overseas investors and the UK institutions are keeping their powder dry, private equity houses, leveraged property companies and REITs are gearing up to fill the void.
“The Institutions and overseas investors have deep pockets and have been formidable buyers in the race to acquire assets in the last 12 months or so. As they vacate the market, other investors are sensing their opportunity to move in.
“What we are seeing, however, is that interest is strongest in smaller lot sizes – sub £10million. The market for £75million plus is looking a little thin right now and some sales are sticking,”
In the longer term, Ashley is confident that the market will bounce back.
“The UK is still seen as a safe haven for overseas money and I can’t see that changing and whilst the UK institutions are pausing, others have positive cashflows and are ready to invest once the referendum is out of the way. What’s more, buyers want value and they can still find it in the regions. The economy is in good shape and low interest rates are continuing to fuel leveraged buyers.”