The UK investment market in the third quarter defied expectations of dampened activity as a result of political uncertainty, with £17bn of deals having been undertaken.
According to Lambert Smith Hampton’s UK Investment Transactions report, this was the strongest individual quarter since Q2 2015 and 14% above the five-year quarterly average.
There were two stand-out deals of more than £1bn – Blackstone and Telereal Trillium’s £1.5bn purchase of Network rail’s Arches portfolio and NPS’s £1.2bn acquisitions of Goldman Sachs’ new headquarters at Pumbtree Court, EC4.
Deal volume up
Year-on-year the number of deals recorded in the third quarter was up by 28%, meaning that it was not just a handful of large deals that contributed to the increased volume.
Overseas investment made up just over half of total purchases at £8.6bn, up by 38% on the previous quarter and 20% above the five-year average. Around half of the capital deployed was focused on central London offices.
There was a polarisation of interest in industrial and retail assets. Industrial deals accounted for £2.2bn of the total, the strongest quarter on record. However, only £1.5bn of retail deals completed, the lowest individual quarter for six years.
Ezra Nahome, chief executive of LSH, said: “Both Q3’s volume and sheer number of deals is clear testament to the ongoing confidence in the core fundamentals of UK commercial property, in spite of the political deadlock over the Brexit negotiations.
Overseas buyers
“UK property remains firmly in favour from overseas buyers. The risks around Brexit are being viewed in a wider global context, with the UK offering relative value alongside its enduring reputation as a safe-haven for international capital.
“The signs so-far indicate that Q4 will deliver another strong quarter for volumes, taking the UK total for 2018 as a whole to circa £60bn, exactly in line with our forecast made at the beginning of the year.
“However, we cannot be complacent around Brexit. Sentiment in the early part of 2019 will depend heavily on the success or otherwise of the negotiations, particularly among the UK funds.
“That said, with limited potential for distress in this cycle, Brexit difficulties are more likely to result in inertia than material price corrections.”
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