Investment in retail hit its highest level in seven years amidst a much busier market in Q3, according to LSH’s latest UK Investment Transactions (UKIT) Report.

Download the latest UKIT Q3 2024 report here in full →

£11.2bn of UK property assets changed hands during Q3, a marginal 1% below Q2’s total, and 6% below the five-year trend. However, this belied a significant pick-up in transactional activity, with the number of recorded deals jumping by 30% on Q2 to its highest level since Q3 2021.

Retail boasted a stand-out quarter, with £2.7bn of assets changing hands during Q3. This is retail’s strongest outturn in over seven years and marks the first time it has out-matched both offices and industrials on volume since 2011. A remarkable quarter for retail warehousing and supermarkets underpinned retail’s strong showing in Q3. Now highly sought after by major domestic buyers, retail warehousing volume hit a two-year high of £900m in Q3.

Investment into the UK’s burgeoning living sectors was once again key to overall volume in Q3, albeit volume of £3.7bn was down 28% on the two-year high of the previous quarter. Healthcare took the headlines in Q3, with a volume of £977m dominated by the quarter’s largest deal, Assura’s £500m (5.90% NIY) acquisition of the Northwest Healthcare UK Hospital Portfolio.

Offices once again remained the main drag on overall volume, reflecting a combination of apathy towards larger lot-sizes and a severe pricing correction. Q3 office volume of £1.9bn was 44% below the five-year trend and the third successive sub £2bn quarter. However, the market was reasonably busy, with the number of transactions standing 6% ahead of trend. Central London offices had its best quarter since Q3 2023 thanks to a welcome reemergence of a few big-ticket deals, the largest being RLAM’s £180m (7.60% NIY) purchase of Atlantic House, EC1.

Overseas inflows of £3.5bn appeared relatively subdued in Q3, down 42% on Q2 and 41% below trend, partly reflecting a quieter quarter for larger portfolio deals, with Q3’s 65 overseas purchases consistent with Q2. North American inflows continue to dominate, with total purchasing of £2.2bn in Q3, led by Lone Star and Hudson Advisors’ £600m purchase of Project Tiger from Charles Street Buildings, a portfolio of mostly industrial assets.

On the domestic front, institutional purchasing rebounded by 20% q-on-q to a two-year high of £1.6bn. However, this was still 20% below trend and, with sales amounting to a hefty £2.6bn, institutions remained net sellers for the tenth consecutive quarter. Meanwhile, private propcos have emerged as the most acquisitive domestic buyers of UK property in 2024. Total purchasing from private propcos hit a two-year high of £2.9bn in Q3, with net buying for a second successive quarter to the tune of £722m.

Ezra Nahome, CEO of Lambert Smith Hampton, commented:

“Consistent volume over the past couple of quarters masked a discernable improvement in both sentiment and buying activity over the summer, with a rebound of deal-making across the wider market in Q3 offset by a lower occurrence of larger transactions.

“This marks a real turning point in the market. A growing number of investors are deciding that now is the time to move forward and get on with business, sensing a window of opportunity to strike a deal while pricing remains relatively attractive in advance of further cuts to interest rates.

“Admittedly, a new chapter of uncertainty has clouded the market again in recent weeks, as investors brace themselves for the upcoming October Budget, while the US election in November continues to look a close call. Despite lingering uncertainty, the direction of travel for the market remains positive, and I expect the final quarter of 2024 to be the year’s strongest yet.”

Download the latest UKIT Q3 2024 report here in full →