Volumes head towards 2006 levels

Total investment volumes in the UK increased significantly in 2014, driven primarily by a high volume of transactions throughout the year.

26th January 2015, words by Kevin Mofid

 

■ As investor appetite showed no sign of abating in the run up to Christmas it comes as no surprise that total UK investment volumes for 2014 rose by almost 9% to reach £59.3bn. In terms of total volumes this is the second highest year in history, falling narrowly short of the 2006 total of £61.6bn.

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Graph 1

■ In many respects the total investment volume for 2014 shows the strength of the current market which is being driven by a volume of deals as opposed to high value single transactions that characterised the market at the end of 2013, such as the acquisitions of Broadgate and More London for a combined £3.4bn.

■ As the amount of capital deployed has increased, investors have begun to look at a variety of sectors and geographies for value. For instance, £4.2bn has been transacted in the logistics sector, an increase of 54% year-on-year and the highest amount invested on record.

■ The year-end saw very little yield movement with only High Street Retail moving in by 25bps to reach 4.25%. As a result the UK average prime yield moved in further and now stands at 4.64%, the lowest level recorded since July 2007.

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Table 1

■ Into 2015 we believe the commercial investment markets will still offer opportunities for both risk-averse and risk-embracing investors, though the stronger than expected bounce in capital values in 2014 will diminish. We expect that in 2015 rental growth in certain markets will make up a greater element of returns with strong growth forecast in the undersupplied regional office and industrial markets.

■ Whilst we see some downside risk to the UK market such as global geopolitical instability we believe the impact of the General Election could be overstated for reasons we explore overleaf.

 

 
 

Key Contacts

Kevin Mofid

Kevin Mofid

Director
Commercial Research

Savills Margaret Street

 

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