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Looking Ahead To The Commercial Investment Market

The start of the year has seen a continuation of the recovery in most sectors of the investment market

The start of the year has seen a continuation of the recovery in most sectors of the investment market reported Richard Higgins, partner who heads up the commercial investment division at this year's Spring Briefing

Richard said: "The momentum is continuing and spreading from the South East Markets, driven substantially by the institutions who have funds to invest due to increased allocations as a result of the substantial rise in the FTSE over the last 12 months.  This activity combined with the weight of private money chasing a limited supply of quality product is resulting in competitive bidding situations driving up prices and reducing yields."

With this backdrop of increasing demand Richard predicted that the year ahead will see continued stabilisation and perhaps limited price increases for prime opportunities and the better quality secondary stock. Specific markets as ever will demonstrate more local supply and demand characteristics leading to regional variations in pricing.

Richard continued: "In Scotland, I predict a continuing shortage of stock for investment with prices maintaining current levels and perhaps increasing as the year progresses. We are optimistic for the year ahead and envisage a period of relative stability with potential for modest improvement in prices for quality stock with the institutions driving the market for larger lot sizes and private investors and smaller funds taking more exposure for lot sizes of up to 5m."

The availability of affordable funding has kept many highly geared purchasers out of the market since late 2008 and with many of the traditional Scottish funders not lending there will be little scope for change in the first half of the year. As a firm, CKD Galbraith is seeing some new players entering the market taking the opportunity of gaining market share at the bottom of the cycle but they are evidently being very discerning.

The fragility of occupier markets cannot be discounted and occupier demand is a key driver in assessing risk. If the latest assessment of economic growth is indeed the start of a long road to recovery, Richard predicted an improvement in occupier demand in 2011 but much depends on the reaction of business and financial markets to the outcome of the general election.

If you would like to discuss any aspect of commercial property investment then contact Richard Higgins at our Edinburgh office.