20 Jun 23 by Claire Cochrane
South West continues to experience strong demand from Investors and defy expectations.
Amidst the context of yo-yoing national economic forecasts, rising interest rates, stubborn inflation and continued geopolitical uncertainty, the South West has continued to defy expectations and attract investors.
Nationally, in Q4 2022, many adopted a ‘wait and see’ mentality resulting in a large reduction of transactional volumes, however, whilst volumes remain suppressed against long run levels, sentiment has increased throughout H1, 2023.
The SW has been relatively shielded and investor demand remains strong across many sub sectors. There is, however, significant variance, both sectoral and geographical even within the region.
The industrial sector experienced very fast re-pricing on a national level in the wake of macroeconomic events, resulting in a correction during Q4,22-Q1,23 of historically low yields.
As 2023 has progressed, the SW has seen the number of active purchasers for industrial assets start to increase once again. Low void rates, a restricted supply of quality units, and continued demand have been sustaining rents and underpinning investors’ confidence. Quality Stock in smaller lot sizes under £2M reaching the market has had strong interest.
VH have recently sold several industrial assets, including a Brandon Hire Station, Plymouth, a pair of well-presented and let investments in Bodmin and are in the process of acquiring a number of single and multi-let assets for clients.
There has been a shift in purchaser profile, with high net worth and regional prop co’s now more prominent, and often less reliant on funding.
The retail sector continues to face challenges, however, with higher yields on offer, many see it as an interesting sector to invest in. This is especially true in the SW where we have seen good demand for strong towns, coastal locations, and re-purposing opportunities on smaller lot sizes. VH have had several recent success stories, including investment disposals on Queen Street, Exeter, St Austell, Plymouth and Okehampton.
The office sector has seen limited opportunities brought to the market during the last 12 months as investors have continued to grapple with the re-occupation patterns of businesses post covid.
More opportunities have come to fruition in H1, 2023 and there are active investors, with high quality buildings and those with longer term potential for alternative uses favoured.
There is a large variation across the region however, with towns like Exeter that benefit from better occupational market fundamentals, and low supply faring better than others. There is a general lack of prime, green quality assets that investors are particularly interested in.
Vickery Holman has the only dedicated property investment team in the South West. To talk to our Investment consultants please get in touch.