UK property investment activity hit a three-year low in Q3, according to Lambert Smith Hampton’s (LSH) latest UK Investment Transactions (UKIT) report.
Just £7.4bn of assets transacted in Q3 – down 14% on Q2’s weak outturn and 37% below the five-year quarterly average. It is the first time since 2012 that the UK property sector recorded a fourth successive quarter of sub-£120bn investment activity.
LSH said the number of recorded transactions in Q3 increased 31% on Q2 and were just 12% below average.
The worst hit sector was offices, which recorded £1.7bn worth of deals – 57% below trend and the third lowest on record. The largest deal was UBS’s £240m acquisition of the Bloom office development (pictured) in Clerkenwell from HB Reavis.
Investment activity in the retail sector rebounded by 26% on the previous quarter, but was still 23% below average. The industrial and logistics sector racked up £1.9bn worth of deals in Q3 – almost twice the number recorded in Q2 and the highest quarterly tally since Q2 2022. Investment activity in the living sector was 37% below trend and 31% down on Q2.
Overseas investors were the most active in Q3, with activity led by investors from North America followed closely by the Far East. All of the main domestic buyer types registered below trend purchasing in Q3. Quoted propcos were the least active with total purchases in Q3 slumping to a record low of £232m – 67% below the quarterly average.
Ezra Nahome, CEO of Lambert Smith Hampton, said: “Q3’s subdued volume was predicted and reflects both the usual lull seen over the summer and the impact of another bout of rate rises over the spring. That said, encouragement should be taken from the clear uptick in volume and especially deals done in the latter part of the quarter.
“Importantly, recent weeks have seen the debate shift from where interest rates will peak to when they will start coming down. This change is giving more certainty for buyers and sellers over pricing and this should translate into a tangible improvement in volumes as we head into 2024.
“The current point in the market arguably represents the very start of a new cycle, with the difficulties over the past year reflecting the painful adjustment away from a long era of ultra-low interest rates. The UK market has seen a swifter, sharper correction than other parts of the globe, and this represents a great opportunity to find value for first movers.”
