In the previous year, office investment had been on the rise in the North West, breaking records of £1.2 billion. Figures of £3.2 billion in transaction volumes have been attained overall in 2017. This shows commercial office investment accounted for 39 percent of total transaction volumes. Although this is lower than usual, it still produced 45 percent more than the 10-year average.
Context must also be explored where pricing is considered. For instance, in 2006/07, pricing may currently appear strong since the yields from offices have returned figures of 4.75 percent. With Fidelity’s recent purchase of The Meridian on Quay Street, Manchester, in 2017, this totaled a net initial yield of 4.85 percent. However, margins from regional offices were lower in 2007 by 0.75 percent, since the Bank of England’s bank rate was 5.5 percent. Whereas, at present, margins are at an increase of 4.25 percent due to the lowered bank rate of 0.5 percent. Still, this is speculative since the Bank of England has hinted at a possible increase in their bank rates this year.
In Manchester, Grade A office spaces have been in high demand, which has consequently led to low supply. Therefore, the take-up period at present equates to 10 months compared to 10 years earlier, when the standard was 26 months. Thus, this proves there are further opportunities for rental growth since demand is currently outstripping supply and there are lower risks in investment.
With high yields from commercial properties that have arisen from lowered bank rates, long-life income streams are predicted to grow by 60% in assets from 2018 to 2022. This can also be applied to industrial properties following the acquisition of Bridge Trading Estate, a multi-led industrial property from the Canal and River Trust for Marnshaw Limited, at a price of £2,201,000. Interestingly, potential rental income is projected to increase from £156,000 to £231,000. The transaction had resulted a net yield of 6.7%, signifying a great opportunity for asset management.
The growing gap in rental prices for urban industrial properties had been noticeable between the South East and North West regions. Statistics have shown that South East rental prices have doubled, with prices starting at £14 per square foot in comparison to the North West’s initial price of £7 per square foot. This makes the north more attractive in terms of rental growth, hence making it more attractive in terms of returns on investment.
With Roger Hannah & Co expertise in the North West, any concerns and enquiries about property management will be dealt to the highest of standards so get in touch today if you would like some more information.