6th March 2018
Roger Hannah
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 had been accounted for 39 per cent of total transaction volumes. Although this is lower than usual, it still produced 45 per cent higher 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 of have rejoined figures of 4.75 per cent. With Fidelity’s recent purchase of The Meridian on Quay Street, Manchester in 2017, this had totaled the net initial yield of 4.85 per cent. However, margins from regional offices were lower in 2007 by 0.75 per cent, since the Bank of England’s bank rate was 5.5 per cent. Whereas, at current, margins are at an increase of 4.25 per cent due to the lowered bank rate of 0.5 per cent. Still, this is speculative since the Bank of England has hinted a possible increase in their bank rates this year.
In Manchester, Grade A office spaces have been in high demand, which had consequently led to low supply. Therefore, the take up period at present equates to 10 months compared to 10 years earlier, where the standard was 26 months. Thus, this proves there are further opportunities, for rental growth since the demand is currently outstripping supply, and that 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 in industrial properties following the acquisition of Bridge Trading Estate, a multi-led industrial property from the Canal and River Trust for Marnshaw Limited at the 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 from £14 per sq ft, in comparison to the North West’s initial price of £7 per sq ft. This makes the north more attractive in terms of rental growth, hence making it more attractive on returns in 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.