Yorkshire property investment market on the rise

Investment in commercial property in Yorkshire and the Humber increased by 11% in 2015, according to new research published today by national commercial property consultancy Lambert Smith Hampton (LSH).

The latest edition of LSH’s ‘UK Investment Transactions’ report claims that a total of £1.765bn was invested in the region in 2015, with £189m of this coming in Q4.

While 2015 was a growth year for Yorkshire and the Humber are as a whole, Q4 saw a fall in deals completed of nearly 30%, 31 compared to 44 in 2014.

Furthermore, the average deal size for Q4 was £6.1m; less than half the average size recorded in the same quarter of 2014.

Office, retail and industrial deals accounted for almost two thirds of all investment, but 41% of the total volume (£77m) of deals in Q4 came in other assets including hotels, leisure facilities and specialist properties.

Bill Lynn, director of agency and investment at LSH, said: “Despite a reduction in Q4, the figures for Yorkshire and the Humber are nonetheless positive, with an 11% growth in 2015 as a whole. This is something that is mirrored in other regions across the country and shows the continued strength of the investment market in virtually every sector. The indication for 2016 is that supply is robust and a strong year is expected.”

Nationally, it has been a record year, with a total of £64.3bn invested in commercial property across the country, 4% up on 2014’s total. This performance was bolstered by a strong end to the year, with investment between October and December reaching £15.7bn, 23% higher than in the previous quarter.

The demand for alternative assets (such as hotels, student accommodation and healthcare) seen in Yorkshire also occurred nationally and was a key driver of activity during 2015, with investment increasing to £14.8bn over the year, 53% above 2014’s total.

Ezra Nahome, CEO of Lambert Smith Hampton, said: “The commercial property investment market enjoyed a stellar 2015 and the outlook for the year ahead remains positive.

“Following a two year run, yield compression is easing and the prospects for further downward yield movement, particularly at the prime end of the market, are looking more limited now. We expect returns to reach 9% in 2016, down from 13% in 2015 (as we correctly predicted at the start of last year) but still well above the historic average.

“With rental income returning as the main driver of performance, pro-active asset management initiatives, such as investment of capex into office refurbishments in areas with few vacancies, are likely to offer the best prospects for investors. This means that knowing your market, almost at a building-by-building level, and understanding the dynamics of each locality, will be more important than ever.

“If anything, political developments arguably pose the greatest risks to the market. A period of uncertainty in the run-up to the UK’s referendum on the EU, coupled with a sense that some of the value has gone from the market, may weigh down investment activity. However, while 2015’s record annual volume is unlikely to be repeated this year, we should see activity to remain well above the recent average.”