Automotive property sees record-breaking investment of £800 million in 2016

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Investment volumes in automotive property in 2016 were the highest ever recorded, heavily influenced by Knight Frank’s sale of the NCP portfolio, totalling £800 million, an 82% year-on-year increase in the sector, as investors seek safe assets that offer long-term secure income according to the latest research from Knight Frank.

Comprising car dealerships, motorway service areas, petrol stations, tyre and exhaust centres and car parks, automotive property is the only specialist sector to have seen volumes rise on an annual basis. Investment volumes surpassed the 10 year average (£300 million) by £500 million, and were a significant increase on last year’s volumes (£440 million).

Adam Chapman, Head of Automotive Property, Knight Frank, commented: “The UK automotive sector has seen increasing numbers of overseas investors attracted to the sector, due to the long-term stability of the market combined with the recent shifts in the value of sterling. This further demand due to good covenants and security of income providing guaranteed rental growth makes this a compelling asset class for investors and will facilitate sustaining current occupational and investment values.”

Increased consumer confidence resulted in record new car sales in 2016, which in turn caused greater dealer profitability. Knight Frank expects another strong investment market performance in 2017 although without a significant portfolio transaction it is unlikely that the numbers will outperform 2016.

Mr Chapman continued: “With a severe shortage in prime vehicle dealership investment stock, we expect demand to migrate to good quality mid-tier assets, and also towards other automotive sub-sectors, including petrol filling stations and car parks. This shows that there remain opportunities for buyers in the automotive sector as investors seek to diversify their portfolios.”

Specialist property, which Knight Frank defines as hotels, healthcare, student property, automotive and PRS, is being recognised by investors as a source of long-term assured income. £70.4 billion has been transacted in specialist property assets since 2007 and its popularity is set to continue, with investment volumes forecast to reach £15bn this year – according to Knight Frank’s report Rest Assured Specialist Property.

Income returns within the specialist sector reached 5.7% in 2016, exceeding the traditional commercial sectors, whilst four of the five specialist sectors saw investment volumes equal or exceed their five and ten year averages.