Partner Article

Investment sentiment improving across all sectors

Dickon Wood, partner, investments at Knight Frank, says regional investment sentiment across all sectors has improved over the last 12 months because of reduced options for occupiers, rising rentals as a result of a shortage of space with the development pipeline still not showing signs of bringing new schemes to the market.

“With easier access to funding investors are looking at the property sector with renewed confidence and its not just for the traditional office, retail or industrial sectors but for a wider range of investments,” says Mr. Wood. “The continued rise in investor interest in core specialist property reflects the appreciation of these business critical assets which, when bought on sensible rent covers and on sound operational business assets, provide their owners with confidence in the durability of income.”

Mr Wood adds that the core specialist sectors such as healthcare, hotels, student property and automotive now account for an ever growing share of the commercial market, a trend which will continue for the foreseeable future. “The key driving factors include structural changes such as the UK’s ageing population and increase in student numbers, and car sales growth, combined with increased occupier demand for high quality property,” he says.

The Knight Frank Wealth Report’s Capital Markets Survey show very wealthy investors are now looking beyond prime or trophy offices and retail space as a safe haven for their funds; they are prepared to look up the risk curve to non-core locations. This is a global phenomenon but if anything the proportion is probably higher in the UK, especially London, but there is growing regional interest.

“The squeezing of yields within the “traditional” sectors such as retail and offices has also prompted investors to look at assets which offer better returns, not to mention opportunities for diversification. This year will see a sharp increase in deal volumes for specialist property, along with rental growth and further yield compression,” adds Dickon Wood.

A recent Knight Frank survey of investors suggested that there is a strong desire to boost allocations to non-core commercial assets including the “sleeping giant” that is the Private Rented Sector (PRS) which is currently a cottage industry worth more than £1.5 trillion in addition to specialist property around the UK. Of particular note is the increasing interest in rapidly growing niche segments such the automotive sector. Care homes too are set to be the best performing asset in the healthcare sector, with a new wave of domestic and international operators set to enter the market. Mental health and learning disability properties are generally undervalued and will offer potential gains to investors.

ENDS

This was posted in Bdaily's Members' News section by Knight Frank .