June saw office investment reach highest level since December 2019 – Colliers

Oliver Kolodseike, Deputy UK Chief Economist at Colliers International

Office investment has seen the best month since December 2019 with £2.7 billion transacted according to Colliers’ Property Snapshot research.

The report also shows that:

  • transactional activity across commercial property picked up in June to reach £6.4 billion breaking through the £6 billion mark for the first time since February 2020, which itself was boosted by the £4.7 billion iQ student portfolio sale.
  • industrial volumes broke through the £1 billion mark for the sixth time in eight months and increased appetite for offices meant that four of the five largest deals in June were from this sector.
  • cross border investment accounted for almost 60 per cent of all activity by value.

Oliver Kolodseike, Deputy Chief Economist at Colliers, comments: “The June investment volumes are a welcome sign of things returning to pre-pandemic levels and this has been mirrored by recent business and consumer survey data such as the PMI which suggest that economic growth is on the up again as people spend their money on staycations and indoor hospitality.

“The pandemic is far from over and the impact of self-isolation rules may play out over the next few weeks and months. However, the unlocking of the country will allow overseas investors to return physically for inspections and the return to the office should help move the market along.”

Colliers notes the £2.7 billion invested into offices in June was 50 per cent above the five-year monthly average. Business parks had one of the best months on record, with £765 million invested including the £714 million Arlington portfolio of 36 assets.

Chris Lewis, head of office investment at Colliers, adds: “We saw a real flurry of activity in June following the momentum that built throughout the first half of the year. As occupiers now look to return to their offices and iron out just what is required for their workforce we expect to see buildings occupied at a much higher rate and even demand from developers to deliver much needed contemporary space, all of which will only help boost appetite for offices going forward.”

Retail investment reached £400 million in June, only slightly below the 2020 monthly average of £430 million according to the Snapshot. Realty Income accounted for three of the four largest deals, led by its purchase of a 99,000 sq ft Tesco at Yeading in Hayes, Middlesex for £69.7 million.

Combined, the leisure and alternative/mixed-use segments attracted £1.7 billion in June, up from £800 million transacted in May. Student housing accounted for roughly a quarter of this, led by the acquisition of a 1,358 student-bed portfolio by a joint venture between London Student Accommodation and GIC for £342 million. Hotel investment reached its second-highest monthly figure since the start of the pandemic as Dorsett City London (£115 million) and the Park Plaza / art’otel portfolio (£113.7 million) both found buyers. The residential sector attracted £330 million in June.