At the start of the year we discussed ‘What’s next for the Commercial Property Market in 2016?’ The market has experienced a great rate of growth over the years with 32% of investment coming from overseas last year. We predicted that 2016 is likely to be another very good year for commercial property due to a number of reasons, such as low interest rate, high and stable income yields

We queried whether the buoyant market would start to put those investors off who have half an eye on a potential future downturn. For the specialist sector commercial market however, no such downturn seems to be in sight with total investment set to increase by 10% year on year by the end of 2016, which according to Knight Frank will be around £14.3 billion of investment.

What are the Specialist Sectors and why are they increasing?

Specialist property include four core sectors of: student property, hotels, healthcare and automotive. In 2015 they accounted for 18.3% of all commercial property investment transactions, with 62% of the capital making its way to the UK from foreign shores.

The reason that investment in these sectors is gathering speed is because they are viewed as assets that provide long, stable income; a very attractive prospect for UK institutional funds as well as debt-backed investors who have entered the market in recent times.

The big players in the area that will certainly continue to rise are student property and hotels. Rental yields for student property will increase by around 3.5% in 2016 as more international investors enter the market. Knight Frank predict that there will be a greater emergence of market opportunities through the break-up of portfolios. There will also be an increase in sale and leaseback activity.

Commercial Property & Gorvins

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