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Manchester becomes key focus for commercial property investment
Office transactions in the UK’s third largest city increased by 8% in the first half of 2016 compared to the same period last year with Manchester becoming a key focus for commercial property investors. Transaction volumes in Manchester’s office investment market totalled £304 million in the first six months of the year, some 3% higher than the five year first half average of £295 million, according to international real estate advisor Savills. The firm’s latest Manchester Office Market Report says that overseas investors showed particularly strong demand for the city’s office assets, accounting for 70% of all transactions with deals worth £212 million. This is well above the long term first half average of 37%, according to Savills. Examples include the £115 million acquisition of 3 and 4 Piccadilly Place by US based Ares Management and the £85 million purchase of XYZ in Spinningfields by Germany’s Union Investment Real Estate. ‘The outcome of the European Union referendum is now sinking in and some office transactions will be inevitably be delayed or renegotiated as investors take stock. However, we expect the increased depth of overseas interest in Manchester to help stabilise the market as foreign buyers take advantage of the weaker sterling and reduced competition,’ said Peter Mallinder, investment director at Savills. Despite the lack of trophy letting deals recorded in the first half of 2016, Savills reports that office take up reached 415,257 square feet, in line with Manchester’s long term average and the third quarter started positively with law firm Freshfields committing to around 80,000 square feet at One New Bailey. A number of other key leasing deals including to Swinton Insurance at 101 Embankment are expected to complete in the third quarter, with take up for the full year reaching one million square feet. This follows a total of 1.3 million square feet in 2015. Savills highlights the diverse nature of Manchester’s office occupier base, which does not overly rely on the public sector or banking and finance, as one its key strengths. The TMT sector has shown particular growth in Manchester and accounted for 21% of all take up in the first half of 2016 with deals totalling 85,307 square feet compared to 17% of deals in the full year of 2015. In terms of size, more than 51% of office space let in the first half of the year was through deals below 5,000 square feet compared to a long term average of 32%, driven in part by the abundance of TMT firms and start-ups moving to the city. ‘Office take up in Manchester has been significantly in excess of the long term average in recent years, which puts the city in a good position going forward and activity levels since the referendum result are encouraging,’ said Richard Lowe, office agency director at Savills. He added that headline Grade A rents have risen from £28.50 per square foot in… Continue reading
UK is running out of bricks to build new homes
A shortage of bricks is a contributing factor in rising house prices in the UK over the past decade with new research suggesting 1.4 billion are needed to meet demand. With demand for new homes growing it means that the number of bricks, the most used traditional building material in the UK, cannot keep up with development, according to research from the National Association of Estate Agents (NAEA) and the Centre for Economics and Business Research (Cebr). The UK’s construction sector would require a total of 1.4 billion bricks in order to resolve the housing shortage in the UK, the equivalent of the total amount which would be needed to build all the houses in Leicestershire. The research report says that between 2006 and 2016, the growing UK population triggered exponential growth in demand, and has now outgrown the number of houses being built. Given that in 2016 the average UK home is made up of 5,180 bricks, resolving the housing shortage of 264,000 units would require 1.4 billion bricks. While house prices are impacted by numerous macroeconomic factors, they are fundamentally driven by the supply and demand of housing units. The shortage of homes has led to sharp house price appreciation and prevented many prospective buyers from getting on to the property ladder. The 1.4 billion bricks deficit could in theory build several of the UK’s famous landmarks several times over including 740 Big Bens, 40 Tower Bridges, 3,090 Manchester Town Halls, 4,540 Warwick Castles and 5,830 Conwy Castles. There are concerns that the impact of Brexit could significantly worsen the issue. In 2015 some 85% of all imported clay and cement which are primary brick components, came from the European Union and the report suggests that depending on how trade negotiations develop, Brexit could have a considerable impact on supply. It also explains that the UK’s brick stock steadily declined between 2008 and 2013 and only partially recovered in 2014 and 2015. Two thirds of small and medium sized construction businesses faced a two month wait for new brick orders last year, with almost a quarter waiting for up to four months and 16% waiting six to eight months. This can partially be explained by the slowdown in building following the recession, it adds, but even although new homes are becoming smaller there are still not enough bricks. Over the past 100 years, the size of the average UK home has shrunk significantly. In the 1920s the average dwelling was 153 square meters and now it is approximately half the size at 83 square meter, meaning homes have shrunk by 46% in the last century. This is partly a result of the fact families are generally smaller, so require less space, however the decrease can also be explained by financial restrictions. As house prices have risen by 45% over the past 10 years house buyers have been forced… Continue reading
Prime seaside properties in UK can cost up to 71% more
It’s well documented that that living by the sea in the UK comes at a cost with the latest research showing prime properties on the coast can cost as much as 71% more. The prime waterfront index from international real estate firm Knight Frank points to a number of towns and cities along the Devon, Dorset and Cornwall coast which have surpassed the wider property market over the last two decades in terms of price growth. Using data from the Land Registry, based on actual sales volumes going back to 1995, the index has calculated the annual price performance of individual coastal markets relative to the average price increase across the three counties. Croyde in North Devon has been the best performing coastal market over this time, with annual outperformance of 4.1% on average. While this may seem relatively muted over the course of a year, over 20 years this equates to cumulative price growth of around 122% above the wider Cornwall, Devon and Dorset area. Over the past two decades, Croyde has seen prices more than quadruple, by 432%, compared to 310% combined across the three local authorities. A number of other long established prime markets including Rock, Salcombe, Padstow and Falmouth feature in the hotspots identified in the research, and have all experienced outperformance of at least 2% annually since 1995 according to the analysis. The index report points out that price growth and outperformance can be very location specific. For example, the average annual price outperformance for the top 15 best performing small coastal towns and villages has been 2.8%, compared with 2.6% for medium sized coastal towns such as Christchurch, Topsham and Lyme Regis and 2.5% for the top five large coastal towns or cities including Bournemouth and Exeter. It also explains that higher outperformance in smaller settlements since 1995 is likely to be related to the scarcity of available stock relative to demand. Demand for prime coastal property comes from a variety of sources. Such markets benefit from their appeal to upsizers and downsizers often moving within the local area or looking for a lifestyle change, as well as second and holiday-home buyers. The research also points out that many homes bought in top seaside locations are second homes and the announcement in the Chancellor’s 2015 Autumn Statement that a higher rate of stamp duty would be introduced for additional properties, including second homes, from April 2016 prompted a number of purchasers to bring forward deals ahead of its introduction. ‘In the short term, it may take time for the tax to be absorbed, especially in a market where there are notable levels of discretionary purchases. In turn, this may have an impact on pricing, potentially providing opportunities for committed buyers,’ the report says. ‘Over the longer term we believe transaction volumes will rise once the additional stamp duty is fully priced into the market,’ it adds. Continue reading
