According to property consultancy Knight Frank, investor interest in the North East commercial market extends beyond the core sectors.
Investment partner Dickon Wood said that all sectors have seen an increase in investment activity over the last year due to reduced options for occupiers, rising rents and a slow development pipeline which is causing a lack of new schemes being brought to the market.
He said: “With easier access to funding, investors are looking at the property sector with renewed confidence and it’s not just for the traditional office, retail or industrial sectors but for a wider range of investments”.
Wood says that hotels, student property, automotive sectors and healthcare are all enjoying a greater share of the commercial market amid increased demand for high quality property.
The Knight Frank Wealth Report’s Capital Markets Survey showed that investors are looking for something other than trophy offices and retail space, leaving the safety net and aiming for riskier non-core assets.
Mr Wood said: “The squeezing of yields within the ‘traditional’ sectors such as retail and offices has also prompted investors to look at assets which offer better returns, not to mention opportunities for diversification.
“This year will see a sharp increase in deal volumes for specialist property, along with rental growth and further yield compression”.
Senior investment surveyor at Bilfinger GVA’s Newcastle office, Luke Symonds, said: “The North East investment market is now truly seeing the benefit of yield compression elsewhere.
“The offices market’s current strength is focused more on locations north of the River Tyne, with both Newcastle city centre and Cobalt Business Park in particular witnessing increased occupational and sales activity”.
Mr Symonds went on to say: “Moving forward, there is an air of optimism in the market and the salient view among fund purchasers and small investors alike, is that the up-trend in the current cycle has a way to go.
“Driven by all-time highs in equity pricing and debt markets finally easing, there remains a weight of money allocated to property and the North East is well-placed to capitalise.
GVA recently conducted research looking at how the deferment of business rates for two years showed how it would cost the North of England £2.3 billion.
“A sensible revision of the rates system is vital for the North East to protect its fragile economy and redress national imbalances”.
