Investment in UK commercial property continued to weaken in Q2 2023 as spending fell further in all main sectors.
Fresh figures from Carter Jonas place retail and offices as the poorest-performing sectors, with volumes down 33% and 29% respectively quarter-on-quarter.
Retail volumes were down to just below £1.6bn, while office investment fell to £1.8bn, some 57% down on the five-year quarterly average. There were no office deals above £500m in Q2 and only four above £100m.
Total commercial real estate investment volumes totalled £6.4bn in Q2, according to Carter Jonas’s figures. This was down by 25% quarter-on-quarter and was 51% below the five-year quarterly average.
The rolling annual total fell below £40bn and was 32% down on the five-year average at £54.9bn, the lowest quarter on this measure since 2012.
Like Q1, investment in Q2 was driven by the regional markets, with close to three-quarters of all investment taking place in the regions – well above the five-year average of 64%.
The East of England recorded the highest level of investment outside the capital with around £380m transacted. It was followed by the South East with just under £330m.
Conversely, investment in London accounted for just 26.5% of the total, some 47% below Q1 2023 and 62% below the five-year average.
Overseas capital continued to drive activity in London, accounting for 70% of the total in the second quarter. French and Far Eastern investors were the most active in the capital last quarter. In the regions, the share of overseas investment was 53%.
In total, overseas investors spent £3bn on UK commercial real estate in Q2, up by 9% on Q1 but 39% down on the five-year average. US investors accounted for half of the total Q2 overseas spend.
The office and industrial sectors accounted for the largest share of the quarterly UK total, representing 29.8% and 29.6% of volumes respectively. Industrial volumes totalled £1.9bn in Q2, which is broadly in line with Q1, but 39% down on the five-year average.
Spending in the alternative sector slowed sharply in Q2 2023. Just over £1m was transacted, down by 26% quarter-on-quarter and 65% below the five-year quarterly average.
Ali Rana, head of national investment at Carter Jonas, said: “The economy is currently experiencing a mixture of positive and negative news, which is creating further uncertainty. The recent increase in interest rates was largely expected, but the potential for further increases is causing investor concern.”
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