Commercial property investment in the South East totalled £878 million in Q2 2019, up 16% from an extremely weak Q1 but 34% below the five-year quarterly average. Over the past 12 months rolling annual investment totalled £4.6 billion, down 20% on the previous 12-month period and mirroring national trends.
The Q-o-Q increase was due to a rebound in office investment, which rose almost 80% from Q1 2019. A number of standout deals bolstered volumes, with Orchard Street Investment Management’s acquisition of the Brinell Building in Brighton (£39m) and Reading Borough Council’s acquisition of Four10 in Reading (£38m), both in April, among the largest transactions of the quarter.
The latter transaction highlights the continued investment of south eastern councils into office assets within the South East. More than £90m was spent in the sector by councils last quarter.
Industrial investment remained broadly the same as in Q1 2019, with around £130m spent, while retail investment fell by 21% Q-o-Q to £147m—less than half of the sectors’ five-year quarterly average—amid weak investor sentiment towards the troubled sector.
There were drop-offs in the alternative sectors as well, with almost nothing spent on either student housing or build-to-rent residential following big inflows into these asset classes in recent years. The hotel and healthcare sectors did see increases, however, with the sale of the De Vere Beaumont Estate Hotel in Windsor for £38.1m to Alpha Real Capital particularly notable.
The broader climate of Brexit has induced uncertainty for many investors across the UK, and this has had a marked impact on volumes. Indeed, investment into UK commercial property in Q2 2019 was around £9.1bn, the lowest quarterly volume since the Q3 2016 and the second-lowest in six years.