Highest Level of Investment in A Decade for 2015 UK Office Market

Posted on 2 March, 2016 by Chris Grigorovsky

UK office investment in 2015 reached its highest level since 2007, with a total of £26 billion, according to Lambert Smith Hampton’s latest UK Office Market Pulse.

Highest Level of Investment in Decade for 2015 UK Office Market

The market which experienced the strongest activity was regional office markets in the South East.

Also reported was the growing demand from overseas for Central London offices, which resulted in institutions being net sellers in the second half of the year, and while prime yields remained broadly stable across the UK, average transaction yields dropped to their lowest level on record.

Take-up in the occupational market reached a 14 year high at 30.8m sq ft, with Q4 delivering 8.1m sq ft of this. There was stellar activity reported in Manchester (+74%), Birmingham (+58%), Edinburgh (+58%) and Belfast (+54%).

Meanwhile, availability continued to see a decline in 2015, falling by 5%, with grade B and C accounting for the majority of the reduction. Speculative development is beginning to support an improvement in grade A supply, which saw an increase by 3% over the year.

The ongoing supply shortages and rising confidence among occupiers, has resulted in a well-established rental growth cycle across the UK office markets, with 28 of the 41 markets seeing headline rents increase last year.

Commenting on the findings, Lambert Smith Hampton’s Capital Markets Director, Charlie Lake, said: “As forecast, 2015 witnessed investor confidence to the regions, with a wide range of overseas investors and institutions attracted by the higher returns away from Central London.

“With income growth likely to be a key driver for investment in 2016, it is encouraging to see our agents forecast further prime headline rental growth in 26 of the regional markets.”

LSH’s UK Office Market Pulse is a new web-based tool which provides investors, occupiers and developers with a detailed insight in various office markets in the UK.

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