UK property investment volumes slumped to £36.7bn last year – the lowest annual total since 2012 and 32% below the 10-year average, according to Lambert Smith Hampton’s UK Investment Transactions (UKIT) Report.
Q4 was the best quarter for deal activity in 2023, with £10.2bn of assets changing hands, up 14% on Q3 but 15% below the long-term trend for Q4. The Q4 figure was boosted by Regis and Blackstone’s £819m purchase of the Vistry Portfolio – the largest UK transaction since the market turned in mid-2022.
The living sector accounted for 40% of activity in Q4 – the second highest share on record. Hotels recorded £692m of investment deals in Q4 – 19% above the quarterly trend – with retail recording £1.7bn of deals – 21% above the five-year quarterly average.
The Q4 office investment volume of £2.6bn was up 18% quarter on quarter, but 36% below the long term trend. Q4 activity took the total office volume for 2023 to £10bn, the lowest year on record and just half the annual average. One of the largest deals in Q4 was UBS’s £221m purchase of Bloom in Farringdon (pictured), London, from HB Reavis.
Industrial and logistics activity was also muted in Q4, with volume of £1.1bn recorded – 53% below the quarterly trend.
Ezra Nahome, CEO of Lambert Smith Hampton, said: “2023 was certainly nothing to write home about, but the final weeks of the year brought the first signs of a market starting to find its feet in terms of activity and pricing. Notwithstanding a range of both global and domestic political risks, the improvement in the final quarter is a platform for a much better 2024, and we are predicting volumes of closer to £45bn for the year.
“Key to kick-starting the recovery is the outlook for interest rates, which has improved much faster than many could have hoped for. With some predicting base rate cuts to come as early as this spring, finance costs have become significantly more attractive in recent weeks, and this will be crucial in stimulating activity over the coming months.
“Pressure over whether to stick or twist is starting to build with regard to decisions on asset allocation. Some investors will be able to take advantage of better refinancing options than feared, but, with a pent-up weight of money seeking out opportunity, many others will accept that the conditions are right to commence disposals.”