UK commercial real estate transaction prices rose the highest of any major national market globally in the first quarter of 2019, according to new data from Real Capital Analytics, as buyers surged to acquire properties in 'a market buffeted by the Brexit political crisis', the research firm said.
UK commercial property transaction prices increased by 11.2% on average in the first three months of the year versus the same period of 2018, the best performance of all the country-level indices covered by RCA worldwide.
'The strong performance of UK commercial property prices in the first quarter seems counter-intuitive in a time of Brexit political turmoil and reduced transaction flow, but it illustrates that during a stressed market period where few forced sellers have yet emerged, it is the best properties that are finding buyers and lifting transaction prices,' said Tom Leahy, RCA’s senior director of EMEA analytics.
'Research tells us that owners tend to dispose of winners and hold losers in these circumstances. They also need an incentive to sell given the associated costs of trading in and out of the market, which has helped to push up sale prices,' Leahy added.
The RCA data did find significant inequalities across the UK however, with prices for offices in the big six city markets outside London (Birmingham, Bristol, Edinburgh, Glasgow, Leeds, Manchester) coming off a low base and still 15% below their pre-financial crisis peak. Central London offices, meanwhile, are 55% above that level.
Retail transaction prices however proved 'unfailingly dismal', RCA said, right across the board.
In contrast, the industrial property sector - predominately located outside of London – was described as a 'major winner' over the last three years. Prices have risen at an average of 11% a year over this period, RCA said, compared with 7% for the wider UK commercial market.
Much of these gains have been driven by the weight of investment capital piling into the sector, pushing yields down to record lows and prices to all-time highs.