Investment into UK real estate dips in April but many forces at play

Property slowdown

Investment into UK commercial real estate reached GBP2.6 billion in April 2021, down on the GBP4.2 billion seen in March according to Colliers’ latest Property Snapshot. The Easter holiday, the reopening of retail and leisure, and a lack of available industrial stock all played a role in the muted investment volumes recorded. 

The commercial property specialist notes that three of the four largest deals in April were portfolios, led by Brookfield’s purchase of seven retail parks for GBP330 million. The largest single deal of the month was the sale and leaseback of McLaren Group’s global HQ in Woking for GBP170 million. 

Oliver Kolodseike, Deputy Chief Economist at Colliers, comments: “The drop in April’s investment volumes is somewhat tempered by the growth of the economy by 2.1 per cent in March, providing hope that April’s economic figures will follow suit as retail and leisure were able to reopen in some capacity. A focus on the easing of restrictions and the Easter bank holiday have all meant that activity was muted in April, and a lack of stock continues to hamper the industrial sector. However, a sense of relative normality should help activity pick up as we head into the second half of the year.” 

Retail was the only sector to record an increase in investment volumes compared to March, reaching GBP700 million compared to GBP410 million in the previous month. Brookfield’s purchase of seven retail parks boosted the monthly figure, being one of the ten largest retail warehouse deals ever recorded. Supermarket Income REIT remains acquisitive, buying a 54,300 sq ft Tesco in Colchester for GBP63 million. Elsewhere, Melford Capital bought Northampton’s Riverside Retail Park for GBP55 million and a private investor purchased a 77,600 sq ft Sainsbury’s in East Barnet for GBP50 million. 

Office investment volumes were muted in April notes Colliers, with around GBP550 million transacted down from the GBP870 million seen in March. The McLaren sale and leaseback was the largest single deal of the month, with other highlights including a JV between Harrison Street and Trinity IM acquiring the 12-asset BioCity Group portfolio for GBP120 million and Manchester recording one of its largest deals in recent months, as 8 First Street was sold to Ashtrom Properties UK for GBP82 million. 

John Knowles, head of National Capital Markets at Colliers, adds: “Although there’s was a slight dip in activity in April, there is still a real sense of pent-up demand in the market. Completed deal levels understate the enthusiasm and negotiations ongoing in the market, as well as the increasingly diverse array of global investors seeing value in UK real estate. We are seeing significant appetite for top quality offices and future proof assets such as student accommodation and BTR schemes, and expect momentum to only build from now to the end of the year.” 

Demand for industrial assets remains strong but is hampered by a lack of available product. Volumes reached GBP600 million in April, down from the GBP1.5 billion recorded in March. Aberdeen Standard was acquisitive, buying four separate assets for a combined £235 million. The largest of which was the purchase of a 779,000 sq ft distribution warehouse on Field Lane in South Elmsall for GBP110 million. Tritax and Prologis also continued their expansions in the sector, with the former buying an 872,000 sq ft warehouse at Avonmouth’s Accolade Park for GBP90 million and the latter purchasing the former Arcadia distribution centre in Daventry for GBP82.5 million. 

The leisure and alternative/mixed-use segments attracted a combined GBP730 million of investment in April, down from just over GBP1 billion in March. The student accommodation sector accounted for GBP350 million, the second-highest monthly figure since the sale of the iQ portfolio a year ago. The figure was boosted significantly by the GBP315 million sale of the Quintain portfolio to Lone Star, comprising 2,621 student beds across four assets in Cardiff, Hatfield, Sheffield and Swansea. In one of the largest leisure deals so far this year, Centrica Pension Fund bought a David Lloyd centre on Northwood’s Ducks Hill Road for GBP51 million.