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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
Low inventory levels in many parts of the US caused home sales to fall in July
Existing home sales in the United States lost momentum in July and decreased year on year for the first time since November 2015 with a fall of 3.2%, the latest index data shows. Total existing home sales fell to a seasonally adjusted annual rate of 5.39 million in July from 5.57 million in June and are now 1.6% below a year, only the second time in the last 21 months this has happened. The data from the National Association of Realtors (NAR) also shows that the median existing home price for all housing types increased by 5.3% in July to $244,100, the 53rd consecutive month of year on year gains. Lawrence Yun, NAR chief economist, said that existing sales fell off track in July after steadily climbing the last four months. ‘Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,’ he explained. He pointed out that real estate agents are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows. ‘Furthermore, with new condo construction barely budging and currently making up only a small sliver of multi-family construction, sales suffered last month as condo buyers faced even stiffer supply constraints than those looking to purchase a single family home,’ he added. The report also shows that total housing inventory at the end of July inched 0.9% higher to 2.13 million existing homes available for sale, but is still 5.8% lower than a year ago and has now declined year on year for 14 months in a row. Unsold inventory is at a 4.7 month supply at the current sales pace, which is up from 4.5 months in June. ‘Although home sales are still expected to finish the year at their strongest pace since the downturn, thanks to a very strong spring, the housing market is undershooting its full potential because of inadequate existing inventory combined with new home construction failing to catch up with underlying demand,’ said Yun. ‘As a result, sales in all regions are now flat or below a year ago and price growth isn’t slowing to a healthier and sustainable pace,’ he added. The share of first time buyers was 32% in July which is below last month when it was 33% but up from 28% a year ago. First time buyers represented 30% of sales in all of 2015. All-cash sales were 21% of transactions in July, down from 22% in June, 23% a year ago and the lowest share since November 2009 when it was 19%. Individual investors, who account for many cash sales, purchased 11% of homes in July, unchanged from June and down from 13% a year ago while 70% of investors paid in cash in July. Coming in at the… Continue reading
First time buyers keep UK mortgage lending going in second quarter 2016
Home buyers in London borrowed £5.5 billion in the second quarter of 2016, down 23% compared to the previous quarter and down 3% year on year, the latest data shows. It was first time buyers who kept the market going in London, borrowing 10% more while those remortgaging borrowed less, the figures from the Council of Mortgage Lenders (CML) shows. They also increased in Scotland and Wales. Overall borrower took out 17,500 loans, down 17% on the previous quarter and 8% compared to the second quarter 2015 but first time buyers borrowed £3 billion, up 3% on the first quarter and 10% compared to the second quarter last year. This equated to 10,800 loans, up 3% quarter on quarter but down 1% year on year. Home movers borrowed £2.5 billion, down 41% on quarter one this year and 14% compared to a year ago. This equated to 6,700 loans, down 37% quarter on quarter and 18% year on year. The figures also show that remortgage activity totalled £4.3 billion, up 6% on the first quarter 2016 and 29% compared to a year ago. This came to 14,200 loans, up 5% quarter on quarter and 19% compared to a year ago. ‘First time buyers have continued to drive mortgage lending in London, with 10% more first time buyer lending in the second quarter than the first. The opposite is true for home movers, probably just reflecting a rebalancing after the very strong first quarter as many buyers sought to complete purchases before changes to stamp duty,’ said Paul Smee, director general of the CML. ‘The second quarter data largely pre-dates the European Union referendum. While it will take time to see how Brexit may affect the market, the London mortgage market clearly remains active and firmly open for business,’ he added. First time buyers were also key in Scotland, borrowing £920 million, up 42% quarter on quarter and 2% year on year, some 8,500 loans, up 39% quarter on quarter and 4% year on year. Home movers borrowed £1.2 billion, up 11% quarter on quarter but down 5% compared to a year ago. This totalled 8,100 loans, up 11% quarter on quarter but down 9% year on year. Remortgage activity totalled £850 million, up 9% both on the first quarter 2016 and the second quarter 2015. This came to 7,100 loans, up 11% quarter on quarter and 4% year on year. Carol Anderson, CML Scotland chair, pointed out that it is the 19th successive quarter of growth in first time buyers compared to a year earlier and the highest quarterly number of first time buyer loans since the middle of 2007. In Wales first time buyers borrowed £420 million, up 31% on the first quarter and 24% on the same period last year. This totalled 3,800 loans, up 31% quarter on quarter and 19% year on year. Home movers borrowed £490 million, down 6% on the first quarter of the year but unchanged compared… Continue reading
