Investment in commercial property is on the up in the UK regional cities at the moment. Several reports have shown that although the third quarter of 2015 saw the overall amount invested in UK property decline from the previous quarter, investment in the regions was up.
The largest of the deals in Manchester saw Deutsche Asset & Wealth Management pay £100m for Mosley Street Ventures’ Two St Peter’s Square, to which Big Four accountancy EY will be moving in 2017. This was rivalled by major deals in Birmingham, where Ashby Capital bought Colmore Plaza for £140m (the investor’s first deal outside London); and in Glasgow where Moorfield took three buildings at the Atlantic Quay development.
Q3 was the first quarter in the last year in which investment volume in the regions combined outstripped that of the London market. It was reported in July that yields in the biggest regional office markets were up to 1.5% higher than those in London.
There is a noticeable trend of UK institutions and newer investors alike looking elsewhere. The third quarter of this year was, according to reports, the first quarter in three years in which UK firms were net disinvestors in the capital.
It’s hard to say how significant this is. London remains the favoured destination for overseas money. It’s something of a banker, a modern-day interpretation of the old ‘nobody ever got fired for buying IBM’ line. It’s also become the favoured destination for investment by offshore companies, with £143.2bn spent since the year 2000 by companies registered offshore, according to a recent Property Week report – the North West is third in the list, with £21.9bn.
Investment in the UK regions still isn’t for everybody. That’s maybe understandable to some extent in relatively unproven asset classes, such as PRS residential. But there’s a long track record here of offices and industrial property being markets where the smart investor can get a decent return.
OBI work with some smart investors and they’re very interested in Manchester. NFU Mutual’s strategy on buying Chancery Place was to make it the best premier, boutique office space in the city and market it as such. This reaped the rewards, with a new headline rent for the city.
Other investors we work with include Boultbee Brooks, which in summer 2015 added two Mosley Street buildings and the Deansgate Chapel (home to Pannone Corporate), to its earlier purchases of 30 Brown Street and Croxley House. It’s easy to see why any of these buildings would appeal.
LJ Group, meanwhile, has invested in a four-strong portfolio of buildings around Albert Square, on which we are working both on interior design and fit-out, and working alongside JLL as leasing agents. LJ paid Wrather Group circa £16m for the portfolio. There’s always a lot happening within the square itself, and now with these buildings and two others being brought forward by Bruntwood, it looks like being a key area of office market activity in the next year or so.
In a recent Property Week report on UK inward investment, Sir Michael Bear, chairman of the Regeneration Investment Organisation, wrote that his advice to international investors is to “follow the local money”. Local knowledge combined with the weight of international money is a formidable combination, and Manchester’s international profile stands it in good stead.
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