North East Investment market sees strongest first quarter in over a decade   

£181.9m of commercial property assets changed hands across the North East in the first quarter of 2018, up 47% on the same period in 2017 and the strongest first quarter in over a decade, according to Lambert Smith Hampton’s latest UK Investment Transactions (UKIT) report.

Reflecting the productive start to the year, the total number of deals was also 91% above the same period in 2017, albeit the average deal size fell from £11.27m to £8.27m.

The retail sector rebounded from its somewhat muted finish to 2017, with £78.3m worth of retail deals in the first quarter accounting for 43% of total volume. This was underpinned by two large deals, namely CBRE Global Investors’ £39.4m purchase of the Arnison Retail Centre in Pity Me, Durham City and St James’ Place UK’s £35.3m purchase of Hermiston Retail Park in Consett.

Both the office and industrial sectors also saw improved volumes at £44.2m and £20.2m respectively, with deals including LSH’s acquisition of Rotterdam House, Quayside, Newcastle upon Tyne on behalf of UKRO for £10.1m and Mordril IO’s £4.3m purchase of an industrial unit on Raleigh Court in Middlesbrough, contributing to the growth.

Conversely, interest in the North East’s alternative asset classes, which includes segments such as healthcare, student accommodation and hotels and leisure, waned slightly in the three months to March 2018, with just £39.2m worth of deals crossing the line, a fall of 37%. Deals included Impact Healthcare REIT’s purchase of a portfolio of three purpose-built care homes in the North-East of England for £17m and Harrison Leisure’s purchase of Percy Wood Golf and Country Park in Morpeth for £16m.

At £94m, UK institutions were the most prolific buyers, accounting for 55% of total activity, while UK quoted companies, UK private companies and private investors made up the balance. However, notable by their absence for the fourth consecutive quarter, overseas investors continued to adopt a cautious approach towards investing in the North East.

Luke Symonds, Capital Markets at LSH, commented: “The North East’s commercial property investment market has had a phenomenal start to 2018, led by a resurgence from the somewhat ailing retail sector and bucking the national trend in this regard. It’s also encouraging to see institutional purchasers providing the majority of volume in the region after a period of net sales.

“This is a clear indicator of the latent demand that has been waiting in the wings in anticipation of good quality stock being brought to the market.”