Commercial property investment cooling thanks to influx of stock

Investment into the British commercial real estate sector has cooled this year after seeing a 40% year on year increase between 2020 and 2021, analysis by Revolution Brokers has found.

Last year, just shy of £50bn was invested into the commercial sector, with the revival of a pandemic-stricken London market driving this activity with £21.2bn worth of investment alone.

However investment levels are expected to fall back by -24% to around £38.1bn this year.

As of July this year, £22.2bn has already been invested into the British commercial property sector, an average monthly total of £3.172bn.

Almas Uddin, founding director of Revolution Brokers, said: “While the residential property sector has boomed during the pandemic, the commercial landscape has been far more complicated, with Covid restrictions hitting the hospitality and office sectors particularly hard.

“Despite this, the commercial sector enjoyed a notable level of investment in 2021, as many anticipated the impending uplift that work and leisure spaces enjoyed following a return to normality.

“This market activity has remained robust so far in 2022 which is a reassuring sign, however, we estimate that it will sit below the benchmark set last year. This isn’t unusual following a period of particularly high investment and an influx of stock to the market has also reduced the asking prices of these commercial plots.

“Of course, this does present a good opportunity for the savvy investor to strike while the price is right and bolster their commercial portfolio for a better price than they would have been able to a year ago.”

An oversaturation of stock available on the market may be to blame for the commercial market slowdown.

Between 2019 and 2020, the level of commercial real estate listed for sale across Britain fell by -26%, with this heightened demand also pushing up the average asking price of commercial plots by 6%.

This trend continued between 2020 and 2021, with available stock falling by a further 14% year on year, with the average asking price this time climbing by a notable 34%.

However, the level of stock available on the market in 2022 has actually climbed by 7% versus last year, with this additional supply also causing the average asking price to drop by -17% year on year.

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