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Lambert Smith Hampton research reveals commercial property investment is emerging from the recession29th January 2014

Lambert Smith Hampton research reveals commercial property investment is emerging from the recessionAccording to new analysis by national commercial property consultancy Lambert Smith Hampton (LSH), investment in the UK commercial property sector increased to £45.0bn in 2013 – a 48 per cent rise on the previous year and the highest volume achieved since 2007. 

The latest edition of LSH’s quarterly UK Investment Trends report reveals that London remains the primary target for commercial property investment, accounting for 53 per cent of the UK total. The capital attracted £23.9bn of deals during 2013 – the highest figure recorded since the report began in 2002.

Regional markets also saw a strong finish to 2013, with investment volumes rising by 80 per cent in the second half of the year in comparison with the first to drive an overall annual increase of 61 per cent. In the South West, regional investment increased from £0.67billion in 2012 to £1.1billion last year.

In addition, the analysis shows that offices are the most popular asset class among investors. Office deal volume represented 51 per cent of the annual aggregate investment figure and amounted to £23.0bn, a 46 per cent increase on 2012. Investment in retail rose by 67 per cent year-on-year and accounted for 21 per cent of the UK total, although the market remains highly polarized as buyers focus on prime assets in the best locations. Deal volume involving industrial and logistics assets more than doubled, but represented only 9 per cent of the total.

Darren Sheward, head of office for LSH in Bristol and the South West, said: “The UK commercial property sector had a stellar end to 2013, with investment at levels that we haven’t seen since before the global financial crisis. There is a clear demonstration of investor confidence in the South West following a 64 per cent increase in transactions in the region in 2013.

“The improvements in the economy, coupled with the continued attraction that large lot sizes and Central London prime stock hold, have been an important driver of this growth. We’re still around 35 per cent below the 2006 peak but, crucially, there is less of a reliance on gearing this time around.”

“There is now a considerable degree of momentum behind both the UK economy and property market. The increase in demand that we’ve seen almost across the board for investment-grade commercial property and an improving outlook for occupiers means that investors should be targeting total returns of 12-14 per cent this year.

“UK property’s relative attractiveness versus other asset classes and other international markets will continue to fuel investor demand, so we may well see deal value break through the £50bn barrier by the time the year is out.”

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