Commercial property market not heeding economic uncertainties

Tim Matthews, Chief Executive of Blue Marble Asset Management

Uncertainties over Brexit and a Trump Presidency are having no apparent negative effects on the commercial property investment market, as prices continue to increase across certain sectors to what may become a more challenging period, given the cyclical nature of the property market, according to a real estate asset management specialist.

Tim Matthews, Chief Executive of Birmingham-based Blue Marble Asset Management, which buys, sells and manages investment properties for clients, says that the commercial property investment market shows no signs of slowing, as investors continue to look for the strong returns available from this asset class. This means that investors should realign their investment buying criteria more towards those assets that can still offer opportunities to add value, as opposed to chasing down the yield.

He says: “Despite the macro-economic uncertainties of Brexit and Trump and how this may impact on returns from UK office and industrial rents in 2017, the sheer weight of private investor money looking to invest in commercial property is continuing to have a hardening effect on prices, which is evidenced by total returns on commercial property falling from 13.8% in 2015 to 5.3% in the Year to September 2016.”

This desire to continue investing in commercial property was supported by JLL’s Real Estate Investor Confidence Survey in Q3 of 2016, conducted after the EU Referendum, which found that a majority of investors (68%) intend to be net purchasers of UK commercial property over the next 12 months, with more than a quarter (27%) intending to increase their exposure to the sector.

Mr Matthews continues: “As we continue to search for good value investments for our clients, we are seeing increasingly higher prices being paid, driving up capital values which brings with it more challenges in maintaining healthy returns. The market may soon be in a position where if the investor wants to sell in the short to medium term they may be less likely to recover their capital, especially when a future (inevitable) market correction is factored in.

“Regarding commercial property investments as ‘long term holds’ coupled with active asset management strategies is now, by far, the safest option for private investors who should seek professional strategic advice before even bidding for a property.

“The risk of losing capital is a real one.  The most recent market adjustment in 2007-08 saw an average 30% fall in property values and a market for three to four years where there were precious few buyers.  The major difference is, if that were to happen again, the lower level of bank debt would see investors, rather than banks, take much more of the loss.”

Based in Birmingham’s Colmore Business District, Blue Marble Asset Management is a real estate asset management specialist which presently has more than £60 million of property assets under management.  It works for a select range of clients including investment businesses, high net worth individuals, trusts and family offices.  Its business is based on taking a holistic and strategic view of each of its property investments.