Investment insight – the 2016 outlook
The past six months has seen an influx of positive stories in the press and messages from experts that the UK is the best place to invest your cash, and Head of Investment at Harris Lamb, Peter Wood, couldn’t agree more.
The past few years have seen strong investment in property portfolios across the UK with a £71million total at the close of 2015. We can expect transaction volumes to match those of the last year for 2016, but it’s inevitable that they will start to level off, and investors should start to anticipate lower yields and an increased reliance on rental growth when identifying opportunities.
Prime office space and industrial property remains the biggest draw to investors, and with the huge surge in manufacturing within the Midlands – thanks in no small part to the prolific growth of JLR and the supply chain it necessitates – the Midlands as a whole is a particular hot-spot for investment and looks set to continue to be for the foreseeable future as investors continue to set the sights further afield than the capital.
A key driver in the Midlands’ heightened status as an investment hot-spot has been the influx of foreign investment. This has long been an important factor in investment within London, but international investors have now turned their attention away from the capital in favour of Birmingham, Worcestershire, Bristol, Manchester and Leeds – with around 35 per cent of transactions in those regions involving foreign buyers – a leap of almost 50 per cent on previous years, putting the regions in a stronger position than ever before.
Inevitably the prospect of Brexit is causing some hesitation, with investors holding back on making decisions as they await the results and assess the impact on the UK’s economy and its property market. That said, especially with the smaller private investors their enthusiasm remains, and with commercial property in the UK as a whole being generally well-priced, it is the logical choice to form the core of a multi-asset portfolio.
With investors keeping a close eye on the employment market – with the manufacturing sector very much being a forerunner when it comes to supply and demand – we believe that prime offices, and industrial and warehouse space, particularly in select, well-accessed UK cities, will continue to be the core focus for the remainder of 2016.