Commercial Buyers Of New Build Real Estate Increasingly Looking Beyond The M25 As Market Falters

Forecasts predict a slump in new build sales in London by the end of the year

Search Acumen Commercial Real Estate Insights – Q3 2019 edition

  • Commercial new build transactions outside the capital set to rise in 2019 while Greater London transactions set to fall precipitously as Brexit bites
  • Commercial real estate new build sales growth in London set to be down by a third as only one in six new build properties are sold in the Capital
  • Liverpool and Birmingham lead the way as commercial new build growth areas
  • Real estate professionals will need to look further outside the M25 for commercial building opportunities as London’s big-money appetite falters

10 October 2019 – Commercial buyers’ appetite for new build properties is increasingly focusing outside London in 2019, with 83% of transactions falling outside the M25 – up from 74% in 2017, according to insight analysis from Search Acumen, the property data insight and technology provider.

Search Acumen’s analysis of HM Land Registry (HMLR) data shows that overall new build sales to commercial buyers across the whole of England and Wales are currently down 7% year-on-year in 2019 when comparing registered transactions between January and May (5,771 versus 5,364).

But outside of London, 2019 is likely to be another busy year for new build commercial transactions beyond the M25 where buyer activity is keeping pace with 2018’s figures despite market uncertainty.

London commercial new build purchases in the doldrums

When looking at the number of transactions completed year-to-date, the 33 boroughs of Greater London have experienced a marked slowdown in commercial appetite for new build properties.

Between January and May 2019, the capital recorded just 928 transactions compared to just 1,372 over the same period in 2018. This 33% drop suggests that total annual transaction numbers within London will be significantly down for 2019, to the lowest level since before 2016, unless the market picks up markedly before the end of the year.

FIGURE 1 – COMMERCIAL NEW BUILD REAL ESTATE SALES AND FORECASTS IN GREATER LONDON, COMPARED TO ENGLAND & WALES

Total no. of sales, England & Wales No. of sales, Gr. London No. of sales, England & Wales excl. Gr. London Annual sales growth, England & Wales excl. Gr. London Annual sales growth, Gr. London No. of sales in Gr. London as a percentage of all sales No. of sales outside Gr. London as a percentage of all sales
2016 15,480 3,206 12,274 20% 80%
2017 15,700 4,198 11,502 -6% +31% 26% 74%
2018 17,340 3,951 13,389 +14% -6% 22% 78%
2019 (f) 15,952 2,647 13,523 +1% -33% 17% 83%

Source: Search Acumen analysis of HM Land Registry data

FIGURE 2 – COMMERCIAL NEW BUILD SALES AND FORECASTS

search acumen

Source: Search Acumen analysis of HM Land Registry data

Strong regional areas drive new build success in 2019

With activity increasingly focused outside the M25, London now accounts for just one of six local authorities which have registered at least 100 sales of new build property to commercial buyers between January and May 2019, with Liverpool leading the way on 254 completed purchases. Birmingham (183), County Durham (113), Redbridge in East London (109), East Riding of Yorkshire (108) and Slough (100) have all reached three figures already this year.

However, among these commercial new build hotspots, Redbridge has seen the biggest annual percentage increase in activity so far: one of the few bright spots in Greater London this year. The 109 registered purchases are a 506% increase on the 18 seen during the equivalent period in 2018. This activity is likely fueled by the fact that it is a major Crossrail corridor with several new Transport for London stations created in the borough.

FIGURE 3 – COMMERCIAL NEW BUILD PURCHASE HOTSPOTS 2017-2019

Local Authority District No. of sales, Jan-May 2019 No. of sales, Jan-May 2018 No. of sales, Jan-May 2017 Change 2018-2019 (volume) Change 2018-2019 (%)
Liverpool 254 148 307 106 +72%
Birmingham 183 156 25 27 +17%
County Durham 113 83 91 30 +36%
Redbridge 109 18 8 91 +506%
East Riding of Yorkshire 108 59 91 49 +83%
Slough 100 53 30 47 +89%
Lambeth 93 24 87 69 +288%
Tower Hamlets 90 53 102 37 +70%
Leeds 84 70 73 14 +20%
Salford 84 20 203 64 +320%

Source: Search Acumen analysis of HM Land Registry data

Caroline Robinson, Commercial Real Estate Business Development Manager at Search Acumen, comments:

“London has long been seen by investors and real estate professionals as the commercial real estate centre of England and Wales – not surprisingly when one considers the sheer amount of construction that’s been going on for the last 20 years.

“But it seems that the price of land coupled with an anemic economy at the mercy of Brexit negotiations has led to a significant slowdown in new build real estate sales to commercial buyers. Just two years ago, more than a quarter of all new build sales happened within the M25; this year, fewer than a fifth are happening in the capital.

“While new build real estate sales have significantly curtailed in London, key cities in the North of England have gone from strength to strength. The continuing regeneration of Liverpool’s city centre and docks has made it the hub for new real estate development over the last four years. And it shows no signs of abating this year, even in the face of Brexit malaise, neither do strong growth areas in Birmingham, Leeds and Salford.

“The Northern Powerhouse is firing on all cylinders as more real estate is built and sold in the region – and if the plans for the Northern  rail improvements go ahead, we can expect the region to continue to eclipse London’s new build real estate market for years to come.

“These figures should serve as a wake-up call to the commercial real estate sector. Developers, financiers and law firms that retain a ‘London-centric’ worldview are likely going to miss out on much of the new business that’s happening in England and Wales. We are seeing a revolution happening outside of the M25, and firms need to be dedicating more time and people-power to ensuring that they are looking outwards towards the growth and potential in the market in 2019 and beyond.”

 

This article was submitted to be published by Search Acumen as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.

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