Cushman: UK alternatives sector growth defies Brexit gloom

However, the growth in the alternatives sector seemingly continues unabated. Alternatives now account for 37% of year-to-date investment volumes into UK CRE, making it the most active sector in the market. All other property types have seen their share of investment decrease in 2019 – offices’ share is down to 33%, for example.

Greg Mansell, Head of UK Research & Insight at Cushman & Wakefield, explains:

“This collection of specialist real estate, infrastructure and long-income deals has steadily grown its share of the investment market since the global financial crisis. In the last few years, we have seen this trend accelerate as retail and office performance has weakened and we expect the appeal of alternatives to continue.”

Jason Winfield, Head of UK & Ireland Capital Markets at Cushman & Wakefield, said:

“Investors like alternatives for different reasons. For some, the abundance of long leases is the appeal. For others, the high returns associated with operational responsibility is the draw. Tellingly, investors are willing to invest at scale when they find the right opportunity irrespective of the property type.”

While the alternatives sector is upbeat, total UK commercial real estate volumes amounted to £12 billion in Q2 2019, down 23% year-on-year. Cushman & Wakefield forecast £45 billion total investment volumes by year end.

Winfield added:

“The decline in overall investment volumes is in part due to institutions decreasing their activity. A slowing UK economy and a fast-approaching Brexit deadline has made those already heavily invested in the UK more cautious. That said, private equity investors have been increasingly active as both buyers and sellers. As buyers, they had a 28% share of all investment in the second quarter – their largest share since 2008.”

The three largest deals this quarter accounted for a third of all investment, the highest share since 2013, demonstrating the enduring appetite for big deals.

Cushman’s analysis concludes tomorrow.

james.wallace@realassetmedia.com