Office Investment at record high

March 31, 2015

Office Investment at record high

In 2014, investment in office space in the city of Manchester hit a record high. Investment in Manchester offices more than doubled from £411 million in 2013 to £992 million in 2014. The data (collected by CoStar) reflects the increase in commercial property investment across the whole of the UK, with nationwide commercial property investment figures rising from £53.5 billion in 2013 to £70.7 billion in 2014 – an increase of 32 per cent. This outstrips the previous high in 2006 of £67 billion.

Commercial property is any property intended to produce a financial return for its owner, by being used or occupied by businesses.  That can range from office, retail or industrial premises (including factories and warehouses) to other business types such as hotels or petrol stations. The national growth in investment over recent years is considered to be partly due to the relative strength of the UK’s economic recovery, but it is alsodue to investors expectations of returns from rental and capital growth and well as from the income stream. Until recently rental and capital growth in areas other than London seemed a pipe dream.

Andy Brunner of Morningstar OBSR has suggested “the fundamentals for UK commercial property suggest returns from the asset class could exceed 10 per cent for a third consecutive year in 2015??? and he highlights that “commercial property offers a very high starting yield [with] the prospect of solid capital growth… [and the expectation that] rents will continue rising over the next few years??? as a result of “ongoing supply constraints???.

Moreover, this forecast for commercial property investment only becomes stronger when we look specifically at Manchester.  The city is currently experiencing exponential growth – especially within the digital, media and financial fields – with 65 of the FTSE100 companies having an office in Manchester. The success of new office and retail locations like Spinningfields and fringe of centre First Street, bear witness to the strength of the Manchester economy and the increasing popularity of the city.

And a government pledge of £7bn to bring more economic growth to the region is fuelling global interest, with an influx of foreign investors looking for higher yield assets outside of London.  Investors are recognising that commercial property in Manchester offers the potential for outstanding return on investment and with property prices expected to rise by 22.2% in the next three years, now is surely the time to invest in commercial property in Manchester.

If you would like more information, do not hesitate to contact ustoday and we can discuss investment opportunities in Manchester and the Northwest.