UK institutions have been the biggest buyers of regional properties in the past year, completing £900m of deals sized under £10m since the end of 2010.
However, these purchases made up just 8% of their total transactions during the period and have been oriented towards the prime and “good secondary” end of the market, according to Lambert Smith Hampton’s Q1 UKIT report.
This was reflected by the average transactional yield of these deals falling at around 7.3%.
Private companies were the second-most active group, completing just more than £600m of deals at a yield of 8.5%, followed by private investors, which transacted less than £600m at a yield of just over 7%.
Overseas buyers, which were the biggest players in UK commercial property in the first quarter, buying £2.9bn and selling around £2bn, played the smallest role in the regional and secondary market, completing just over £100m of deals.
Ezra Nahome, LSH’s chief executive, said that values for secondary properties still needed to fall and that the spread between buyers’ and sellers’ expectations remained too wide. These can be as much as 20%.
However, he said re-pricing pressure on secondary assets was mounting as refinancing issues came to the fore and buyers of loan portfolios such as Lone Star and Blackstone started churning assets.
The report also highlighted the yawning divide between activity in the regions and London, which in the first quarter accounted for 61% of the £6.85bn quarterly total – almost double the 10-year average of 35% and up from an average of around 47% over 2011.
