North West investment volumes in the first half of 2018 hit £1.4bn, exceeding the same period in 2017 (£1.15bn) by £250m – according to Lambert Smith Hampton’s latest UK Investment Transactions (UKIT) report.
Although quarter two’s investment volumes fell 52 per cent from quarter one, it is the first quarter’s stellar performance that has set the North West up for such a strong first half of the year.
Office transactions accounted for 31 per cent of the total investment volume in quarter two, which was dominated by core plus deals, compared with the long income deals of the previous quarter. High profile deals included Bet 365’s purchase of the Zenith Building in Manchester for £31.5m (5.25 per cent) and Portsmouth Council’s acquisition of Queens House for £8.89 million (4.75 per cent). In addition there was a marked increase in the number of out-of-town deals with Squarestone’s purchase of Manchester Green by the Airport for £20.5m, the sale of One Didsbury Point for £11m and the purchase of 3400 Lakeside at Cheadle Royal Business Park for £6m.
On first inspection, the retail market remains largely consistent with quarter two transaction volumes at £94.48million ( compared with £105 million in Q1), however this can be attributed to only a handful of deals and there remains a great deal of investor caution in this market. The most notable retail deals include KFIM’s acquisition of the Morrisons supermarket in Openshaw for £24.7m, accounting for 26 per cent of the sector’s investment volumes. Other key deals were Liverpool City Council’s purchase of Liverpool’s Central Shopping Centre and Bolton City Council’s purchase of Crompton Place in Bolton, which together account for 45 per cent of the remainder.
Industrial remains high on investor wish lists due to anticipated rental growth and average yields have been falling as better quality industrial assets have changed hands. Despite the North West’s continued lack of stock, significant deals have included Olympic Court in Salford for £10.8m (4.60%) and the ENZA Building and Grandstand in Warrington which sold for £4.9m (4.75%) and £8.9m (4.90%) respectively.
Investment volumes in the alternative market, which includes residential, student, hotel and leisure, have increased at the half year point, largely due to the first quarter of 2018 being one of the strongest on record. Alternatives are expected to outperform all other sectors by the end of the year, thanks to a number of significant schemes being under offer.
Ben Roberts, Director in the Capital Markets team at Lambert Smith Hampton in the North West said: “At the half year point the North West is performing well and certainly better than the same period last year, but we must temper the story a little, as some very sizeable deals in quarter one are largely responsible for this. Quarter two is a more accurate reflection of where the market is at and, with squeezed stock levels and downward pressure on yields continuing, stock selection will continue to be very important for investors.
“Alternatives are set to be the star of 2018 and we predict this investment class to take-over some of the more traditional markets as investors seek out more value.”
