Savills’ February Market in Minutes report revealed that investor appetite for UK property remained very strong and in 2017 total investment into UK real estate reached £65.4bn, a 26% increase on 2016.
The office and industrial sectors led the way, with overseas investors responsible for nearly half of total volumes and Asian investors accounting for a fifth of all investment.
Savills reported that average UK prime yields remained static during January at 4.52%, around 30 basis points lower than the same period in 2017.
Investors placed nearly £11bn into the industrial sector during 2017, up 80% on 2016.
Savills felt that investors were attracted to the sector due to the secure income it offered.
Mark Ridley, CEO at Savills UK and Europe, said that January’s volumes indicated that investors were still looking beyond Brexit and were happy to commit to the UK to secure prime property.
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“Based upon current projections, driven by a downward shift in equivalent yields, we expect total returns for average UK commercial property to be around 7% this year before weakening slightly for some of 2019 as investors take a 'wait-and-see' approach as the UK officially leaves the EU.”
Steve Lang, director in Savills’ commercial research team, added that February marked the 10-year anniversary of the first Market in Minutes.
“Back then , average UK prime yields rose by over 120 basis points during the year, development activity indicators had slumped and GDP expectations were slashed.
“Compared to this, the impact of the Brexit vote is relatively mild.
“In addition, you would have been hard pushed in 2008 to have predicted the explosive growth in online shopping over the past decade, which has largely driven occupier demand and, therefore, investor appetite for industrial space.”