Slow start to 2018 for commercial property investment volumes in UK

Commercial property investment volumes in the UK in the first quarter of 2018 reached £12 billion, some 11.6% down on the same period in 2017, the latest analysis shows.

The research from international real estate advisor Savills points out that this was, however, 14% above the long term average and there are reasons for optimism in the market.

While compared to previous record breaking years, volumes in the first three months of 2018 appear muted, but volumes in the quarter were 9.2% up on the 10 year average and 14.1% up on Savills series average.

In addition Savills highlights in its latest Commercial Market in Minutes report that with inflation having slowed to 2.5%, regular pay growth at 2.8%, and low unemployment levels, it expects UK consumer confidence to grow once more after being hit in 2017, benefitting the retail sector in particular.

‘While first quarter investment volumes are down year on year, it would be wrong to assume that this translates into weak investor demand,’ said Mark Ridley, chief executive officer of Savills UK and Europe.

‘Taking a wider view, it’s clear that activity in the first quarter of 2018 is broadly in line with previous healthy years and we expect activity to pick up over the course of the year as underlying fundamentals improve,’ he added.

According to Mat Oakley, director and head of Savills commercial research team, first quarters often end with the industry making cautious noises about trading volumes, but 2018 has definitely started with more hesitancy than expected.

‘With consumer confidence returning however, providing a boost for the much maligned retail sector, and a substantial group of investors active in the market, future quarters should be healthier,’ he explained.

‘In particular, as town centre dominant shopping centres are now yielding above 7.5%, we expect to see more opportunistic investors swooping in this sector, with an estimated £900 million of shopping centres currently under offer,’ he added.