Cautious outlook Research carried out this summer asked investors how they were feeling about the changing Welsh market.
Ripples from the recent turmoil in the global investment market seem to have washed up on Welsh shores.
According to research by Stephenson Alexander, seen here for the first time, more than 20% of investors say they lack confidence in the South Wales commercial property investment market. This compares with just 12% when the research was last carried out in 2005.
The research asked 450 UK-wide investors for their opinions on the Welsh market, just as the credit crisis was unfolding over the summer.
“Late June was definitely the top of the market,” says Peter Graham, director at Stephenson Alexander. The firm is predicting a 0.25-0.5% shift out in yields.
Asked whether they have confidence in achieving returns, the number of respondents answering “no” doubled this year to 33%. Most are forecasting a 5-10% drop in property values this year.
The yield gap between South Wales and the rest of the UK has narrowed, and this could have led to many investors saying the main drawback to investing in Wales remains a lack of opportunities. Property companies prefer a yield of 6.4% for South Wales and 6.23% for the rest of the UK, says Graham.
“Wales is not cheaper than other regions, investors are not getting better returns, and we need to make Wales more interesting,” says Graham. “It needs a slight shift to create a bigger yield gap, and we are returning to more traditional values. Performance will come down to working the property.”
There has been a noticeable shift towards retail among Welsh investors, with nearly half saying their next purchase would be in this sector.
“With the retail occupier market looking a bit iffy, that might seem odd, but taking a long-term view, there is still growth in retail, and a lot of people, having moved into offices, are correcting the balance of their portfolios,” says Graham.
