Investment in retail assets hit the highest level for seven years in Q3, according to LSH’s latest UK Investment Transactions (UKIT) Report.
During the quarter, £2.7bn of retail assets changed hands fuelled by domestic buyer activity. Retail warehouse transaction volumes hit £900m in the quarter – a two-year high – with key deals including British Land’s £441m purchase of a portfolio of retail warehouse assets from Brookfield.
Investment activity across all UK property sectors reached £11.2m in Q3 – 1% below Q2’s total and 6% below the five-year trend.
Demand for living sector assets remained strong in Q3, although the £3.7bn of investment activity was down 28% on the two-year high of the previous quarter. Healthcare investment activity reached £977m in Q3 thanks in large part to Assura’s £500m acquisition of the Northwest Healthcare UK Hospital Portfolio.
The office investment market continued to struggle, with the £1.9bn of deals recorded 44% below the five-year trend. However, LSH’s figures show the number of transactions was 6% ahead of trend and the Central London office investment market posted its best quarter since Q3 2023.
Overseas inflows were relatively subdued in Q3, with the £3.5bn of transactions completed by overseas investors down 42% on Q2 and 41% below trend. On the domestic front, institutional purchasing rebounded by 20% quarter-on-quarter to a two-year high of £1.6bn, however, this was still 20% below trend.
With regard to pricing, following five consecutive quarters of outward movement, the all property average transactional yield moved in by 20bps in Q3 to stand at 6.08%.
Ezra Nahome, CEO of Lambert Smith Hampton, said: “Consistent volume over the past couple of quarters masked a discernable improvement in both sentiment and buying activity over the summer, with a rebound of deal-making across the wider market in Q3 offset by a lower occurrence of larger transactions.
“This marks a real turning point in the market. A growing number of investors are deciding that now is the time to move forward and get on with business, sensing a window of opportunity to strike a deal while pricing remains relatively attractive in advance of further cuts to interest rates.
“Admittedly, a new chapter of uncertainty has clouded the market again in recent weeks, as investors brace themselves for the upcoming October budget, while the US election in November continues to look a close call. Despite lingering uncertainty, the direction of travel for the market remains positive, and I expect the final quarter of 2024 to be the year’s strongest yet.”
