Lockdown 2.0 – Investors remain keen
As we moved in to Q4, as with the occupational market, the capital market gathered momentum. UK Institutions remained net sellers but Private Equity and overseas were keen. Then Lockdown 2.0 happened. However, investment demand remained resilient, and deals continued to happen across the country. Birmingham saw two stand out deals complete and go under offer, again recognising the city’s appeal to investors. Generally, the flight to quality continues, with assets that are either prime or offer real repositioning potential finding favour with investors.
Secondary has continued to slip as there is a sentiment that occupiers will seek the very best quality accommodation when the market returns.
The long awaited 55 Colmore Row was the standout deal for Q4 with Nuveen Real Estate selling to Union Investment Real Estate AG for £105M reflecting a NIY of 4.85%. There were underbidders and strong competitive tension. In other deals, 134 Edmund Street was placed under offer with a quoting price of £32.55M reflecting a 6.00% NIY and 31 Temple Street was also put under offer at £13.8M.
55 Colmore Row
Q4 UK Cities deals
2020 has been a challenge in so many respects. However, the City centre office market has continued with demand and buyers coming from a wide range of sources. From major over seas Institutions, to North American Private Equity, to far eastern investors and UK property companies. Investment volumes for Birmingham were at £243M for 2020 which is 39% of the volume seen in 2019.
Investment Volumes for last 5 years
Knight Frank Comment
At the time of drafting, England is again in a lockdown and Knight Frank are once again working from home. But – what a difference a year makes – we are now able to adapt to working from home efficiently and our markets can trade and perform.
We also now have a real light at the end of the tunnel. During 2021, we will see freer movement and the occupational markets will loosen.
There remains an imbalance between supply and demand in Birmingham and the dynamics are positive. Some investors are pausing and contemplating the sector, however in our view, we believe offices are a buy as the market will come back and when it does, there will be positivity and yield improvement. Those investors that are brave enough to act now will capture this. Stock selection is key and the location and asset fundamentals are more important than ever.