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Transactions returning to post-pandemic levels
Investment volumes across the business space sector have remained resilient during H1 2021 despite the ongoing COVID-19 pandemic.
Office investment into Bristol reached £112 million during the first half of the year compared to £87.9 million in the same period last year. This year’s investment equated to a total of nine transactions which highlights how market conditions generally remain challenging, with a lack of new opportunities being brought forward. Unsurprisingly there has been some cautiousness from investors over the last 18 months, particularly towards offices as it remains to be seen how businesses will develop their occupational strategies in the medium-long term. There is no doubt that for many employers, flexible and hybrid working will become much more apparent across many industries and this will consequently shape how offices are used going forwards. We expect there to be a shift away from open plan offices, to more hot desking and collaborative workspaces, with a particular focus on amenities and wellbeing for employees. That said, there remains a good level of demand for prime, well-let office investments and we expect there to be an uptick in the number of transactions in the latter part of this year.
The largest deal of the year so far was Aberdeen Standard’s acquisition of Temple Quay House where they were advised by Colliers in purchasing the asset off-market from Alpha Real Estate for £75 million.
In terms of out of town opportunities, the market during the pandemic and so far this year has been relatively quiet with few investors seeking these assets. However, there have been five new opportunities brought to the market within the last six weeks all of which provide a significant yield discount to similar income lengths in town.
Moving onto industrial, throughout the pandemic the sector has witnessed a huge growth in demand both occupationally and from investors too. The surge in tenant demand has been led by e-commerce and grocery companies. Investment volumes have exceeded that of previous years with circa. £608 million transacted in the region during 2020 and £354.53 million in H1 2021. The region is well poised to exceed 2020 investment volumes, which were exceptionally high in comparison to previous years.
Similarly to offices, with demand for good stock being so strong, many of the industrial opportunities which have transacted have done so off-market. Those that have been brought to the market have seen competitive rounds of bidding. The largest transaction in the first half of the year was the sale of Accolade Wines in Avonmouth which was sold off-market for £90 million. The sale price of the 870,000 sq ft unit equates to a net initial yield of 5.10%. In terms of multi-let estates there has been a limited number of transactions so far this year, the most significant was Orchard Street Investment Management’s sale of Rockingham Gate in Avonmouth which is a fully let four-unit estate. This opportunity was marketed and went to best bids, eventually being bought by Mayfair Capital for £15.9 million which was a net initial yield of 4.12%.
Looking ahead, we expect well let, secure long income assets to remain at the forefront of investor requirements. We also anticipate there will be an increase in the number of opportunities brought to the market, which should lead to a boost in investment volumes in the second half of the year.
