RCA Insights

UK Big 6 Property Price Growth Eclipses London

By on February 20th, 2018

Prices have surged in the U.K.’s largest regional commercial property markets and the national industrial sector in the last 12 months, just as the London market stalls after a lengthy bull run and a sharp drop in institutional investor interest.

The RCA CPPI for the fourth quarter of 2017 shows that commercial prices in the U.K. Big 6 regional markets of Birmingham, Bristol, Glasgow, Edinburgh, Leeds and Manchester increased by almost 20% from a year earlier. Not only is this a remarkable performance in a U.K. context, it makes the Big 6 among the fastest growing markets in the world, just behind Sydney and Hong Kong.

Both deal volumes and deal count have held up well in the Big 6 over the last 12 months and cross-border investment has increased by 10%. Average yields have also come in by around 40 bps over the same period. Investors have stepped in as prices in the Big 6 remain 14% below their previous peak – unlike in Central London, where they are more than 50% up on 2007 levels – and there is a perception that the regional markets could be less affected than London by a disorderly or unfavorable Brexit deal.

1802 UK Big6 CPPI MAIN-01

A similarly strong price performance was recorded by the U.K.’s industrial market, where average prices are now 88% above their trough, recorded in March 2009, and 18%  above their 2007 peak. This puts them further ahead of both the national office and retail markets. The contrast between the industrial and retail sectors amply demonstrates the waning fortunes of the high street and keen demand for distribution warehouses.

In Central London, prices are falling in the West End and largely flat in the City. The market is being sustained by big deals and the annual deal count is at an eight-year low. Prices of these larger lots have not appreciated by the same amount as the smaller lots, which has acted as a drag on the index of late. Until the demand for property expands beyond trophy assets and a relatively narrow group of investors, it is likely this will remain the case.

The most recent RCA CPPI Global Cities report on global commercial property pricing trends was published Feb. 15. To receive this publication and to learn more about the RCA CPPI visit rcanalytics.com

Tom Leahy

Tom Leahy

Senior Director, EMEA Analytics
tleahy@rcanalytics.com

Tom joined RCA in November 2014. In his role as Senior Director for the EMEA region, Tom is responsible for the development and expansion of the market analytics service for RCA’s European clients.

Prior to joining RCA, Tom was an Associate Director and then Head of Research at UK-based property consultancy, Lambert Smith Hampton. He started his career as an analyst at research consultancy Property Market Analysis (PMA).