Rise in property investment lifts recovery hopes

Published on Saturday 13 June 2009 14:50

COMMERCIAL property investment is expected to rise in the second quarter of this year, the first increase in two years, strengthening talk that the battered UK market is showing signs of recovery.

Although the figures start from a low base, they offer hope to the country's beleaguered commercial property industry, which has been one of the worst victims of the recession.

Paul Guest, head of research for Europe & The Middle East for Jones Lang LaSalle, says the amount of money invested in commercial property has stopped declining and is on course for a rise in the second quarter.

The news comes days after the National Institute for Economic and Social Research said the recession was over as economic output in the UK returned to growth during April and May.

Guest said: "There has been a notable pick-up in investment volumes. The figures show that volumes for the first quarter of 2009 were the same as the fourth quarter of last year. It is the first time they haven't dropped since mid-2007. The indications are that in the first two months of this quarter we are already at the levels of 2009, so we are probably going to see a rise quarter on quarter."

The market has recently witnessed a limited number of investors bidding for buildings in prime locations, which come with long-term leases of over ten years. Standard Life recently sold its Exchange Crescent property in Edinburgh's Conference Square for about 54 million.

There has also been a flurry of buyer interest on Princes Street, particularly in the buildings occupied by Waterstone's, HMV and River Island.

Alasdair Humphery, managing director for Jones Lang LaSalle in Scotland, said: "Property is now perceived to have corrected to a pricing level which is near the bottom. The market is now starting to look for opportunities and we are seeing deals happen."

On Thursday it emerged that NewRiver Retail Limited, a property company led by a former Merrill Lynch boss Paul Roy, had applied to float on Aim in a bid to raise up to 250m to "capitalise on the significant and rapid fall in capital values in the retail sector".

It plans to target properties where the major tenant is from value or food retailing.