Outlook still unsettled due to uncertainty – despite strong performing investment market

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Tim Matthews, Chief Executive of Blue Marble Asset Management

With the continued uncertainty about the Brexit process and the Trump presidency, the outlook for the UK commercial property investment market over the next three to six months remains Unsettled, though depending on the level of uncertainty and the markets’ reactions, this could quickly return to Fair, or move further towards Stormy, according to Birmingham-based specialist real estate asset management company, Blue Marble Asset Management (Blue Marble).

In the Winter 2017 Edition of the Blue Marble Barometer, the quarterly forecast of the UK commercial property investment market, Blue Marble says that despite a turbulent year politically and economically, the commercial property market proved its resilience and ended the year on a high note, but it should take note of warning signs and the continued political and economic uncertainty.

Blue Marble Chief Executive Tim Matthews says: “In the circa £1million to £5million lot size sector, there remains considerable demand from private investors and property companies.  The behaviour of private investors who are chasing yield, irrespective of its impact on capital value is seeing some surprising sale prices being achieved even for secondary property.

“Given this behaviour, it is even more important now, than in previous years, for acquisitions to be very carefully selected and priced accordingly to avoid unnecessarily overpaying for a product.

“With the availability of stock also at an historic low level (as many property owners are choosing to hold existing assets due to the difficulty of re-investing) this creates an extremely challenging market for investors and their advisers.”

According to Mr Matthews, 2016 was a good year for commercial property investment with the industrial sector providing the best returns and he is forecasting this will continue in 2017.

He says: “Last year saw continued rental value growth with values rising across the UK by 1.7% over the year as a whole.  The industrial property sector demonstrated a standout performance during 2016, as it made a major contribution to overall averages in the year.  However, this was at the expense of retail property.  With a continued restricted supply of Grade A space in the industrial sector, it is predicted to continue its strong performance into 2017.

“Overall volume of investment transactions in 2016 is expected to be significantly down on the bumper year of 2015, but hardening of prices and strong competition for good quality assets is expected to continue throughout 2017, as commercial property continues to offer investors an attractive alternative to bond and gilt investments through providing a higher rate of return.

“There remains more value in the out of town office and high street retail sectors, with predictions about the return of speculative development in out of town offices in the Midlands in 2017.”