YTD UK investment volumes at £23.1bn but signs activity could increase
While total UK volumes for the year are unlikely to reach the long-term average of £44.9bn in 2020, according to Savills, proportionally certain sub-sectors of the market have seen growth in their share of total investment this year: the alternatives sector has accounted for 44% (£10.2bn) of volumes, its highest proportion ever, largely driven by the purchase of the iQ Student accommodation portfolio for £4.7bn by Blackstone. The industrial sector, meanwhile, has accounted for 13% (£3bn) of total investment volumes so far this year, above its long-term average of a 11% share of the market. Just 89 transactions were recorded in the market in August, compared to 232 in August 2019, says Savills, and given the lack of market evidence the international real estate advisor has kept its Savills UK average prime yield static at 5.23%.
Richard Merryweather, joint head of UK investment at Savills, comments: “With many people taking August as an opportunity to enjoy some down time after the intensity of the last six months it’s little surprise that traditionally the quietest month of the property year has been even more subdued than usual. Despite the low volumes, which are largely down to the limited number of sellers, there is strong demand from a wide range of investors across the sectors. That, combined with more assets being marketed, the removal of material uncertainty valuation clauses, and some funds re-opening for business, could increase activity in the last few months of 2020.”
Kevin Mofid, head of industrial research at Savills, adds: “While industrial has been one of the best performing UK investment sectors this year, it hasn’t been immune from Covid with lower volumes being transacted so far in 2020 than previous years. On the take-up side, demand for warehouse space in 2020 has already reached 30.2m sq ft, exceeding the annual average of 26.1m sq ft, putting this on track to be the best year ever recorded for the amount of logistics space taken. This will maintain the weight of capital being targeted at the sector and keep yields low.”
Read Savills full September Commercial Market in Minutes report online here