Property Investment Market Bright-White Hot!


This time last year, May/June edition, I reported a ‘White Hot’ commercial investment property market, with stock markets anchored by a forthcoming Brexit vote and concerns over economic data coming out of China.

I could not find an adjective to express intense market heat this year, other than bright-white hot! Suggestions to add a better adjective to my limited vocabulary will be welcome and the best, given due credit on our social media!!

Demand for stock continues to outstrip supply. Prices have been pushed to levels which do not look competitive against recent highs of the FTSE and may not look prudent in comparison to company bonds, as yields begin to adjust from post-recession ‘safe haven’ lows. Yet, the appetite for commercial property investment is ravenous.

It is increasingly difficult to source stock which outperform the market, but Drake Howard Property is achieving successes for client’s willing to buy or sell off-market on tight completion deadlines, to buy across a wider geographical area or, take a degree of risk in acquiring empty property.

We use our contacts to identify off market disposals where the promise to complete the transaction within a three to four week period influences vendors away from the maximum price which may be gained from wider exposure and saves on the cost of marketing.

Connectivity in the modern world of communications allows investors to consider opportunities over a much wider geographical area, than has been the case in years past. It is possible to see the property and surrounding occupiers and uses on the Internet, from the street and aerially and, to research comparable transactions in advance of visiting the property. Post-acquisition, information to manage the asset and the ability to sell is not limited by regular visits, or instruction of agents with a regional sphere of influence. We are truly in a ‘global market’.

Where empty property is concerned, search fundamentals are location and type/character to fit the market. If the location is right and the basics of the site and buildings are more or less in place, facilities and condition can be remedied. Given these fundamentals, the risk and cost of a property remaining empty is much reduced in Coventry and Warwickshire, due to an extreme shortage of land and buildings to rent.

As an example, we recently purchased a 7,000 sq. ft. former joinery workshop on Binley Industrial Estate, with forecourt parking, good size yard and external store. The client investor was persuaded to risk purchase at a price of £450,000, with 3 month refurbishment programme, estimated at £85,000. The site and building has been transformed and a letting agreed prior to completion of works. An established automotive service sector company has taken a 10 year lease, without break option, at an average rent to show the investor a return of 6.95%, after all costs!