Savills : Investment volumes stall but UK real estate still offers better returns than other asset classes - Savills

UK commercial real estate investment volumes fell by 5.7% year-on-year in 2018 to £62.1 billion, but UK real estate has performed remarkably well compared to other global asset classes, says Savills.

'2018 year-on-year total volumes may have been down, but they were still up on the three-year rolling average of £59.8 billion. Given the continued political uncertainty around Brexit and the cooling of some global economies, together with the broad range of investors across the sectors and regions, this should be seen a strong message the UK real estate remains a liquid and desirable investment', comments Richard Merryweather, joint head of UK investment at Savills.

UK real estate has performed remarkably well compared to other global asset classes, says Savills, with industrial assets leading the charge with 12 month returns of 17.4%.

Savills says that any weakening of Sterling will have an impact on investment in the coming months, but the fundamentals of UK real estate remain strong. It could also attract more international investors looking for opportunities to buy UK assets at a discount. On this basis, with little risk of over development in many sectors and occupier demand in most markets at surprisingly high levels, the international real estate advisor says it expects that 2019 should see certain sectors continuing to perform strongly this year.

Kevin Mofid, head of industrial research at Savills, comments: 'Alternatives and mixed-use assets accounted for 29% of all UK investment last year, the highest proportion ever, but interestingly, given the positive news surrounding the industrial market, the volumes and market proportion accounted for by this sector declined year-on-year. This is due to the creation of prime stock which is dominated by a handful of companies who hold assets for income, rather than trade, so it's difficult to see how investment volumes in the sector can increase by the same proportion as occupier demand this year.'

Read Savills February UK Commercial Market in Minutes report online here.