"The overall market slipped back slightly in 2018, which is sure to have been influenced by some investors and developers waiting for a Brexit breakthrough."
Thirteen local authority districts across England and Wales exceeded £1bn of commercial real estate sales in 2018, compared with only six in 2016, according to new data from Search Acumen.
The total value of commercial transactions rose 46% between 2016 and 2018, from £65.65bn to £95.96bn. The total volume of transactions grew by 22% over the same period from 121,923 in 2016 to 148,965 last year.
Central London locations continue to dominate the list of areas across the whole of England and Wales that have enjoyed the biggest increase in spend on commercial real estate sales since 2016.
The six areas of England and Wales to register more than £1bn of commercial real estate sales in 2016 all fell within Greater London.
Comparing areas of England and Wales by volume of commercial real estate sales, rather than value, Birmingham and Liverpool have held the top two spots since 2016.
Cities in the Midlands and the North of England are playing an important role in fueling commercial real estate traffic. The top five areas for transaction volumes are all based in the North of England and accounted for 7.4% of all transactions across England and Wales during 2018 (9,758).
However, the data also indicates a potential Brexit slowdown took effect in 2018. Based on transactions logged with HMLR at the end of April 2019, total commercial activity for 2018 was down 4% by volume and 7% by value compared with the previous year.
The average price of commercial sales also dipped from £632,203 in 2017 to £615,030 last year, although this remained 17% up on the average £525,297 seen in 2016.
Caroline Robinson, commercial real estate BDM at Search Acumen, commented: “The commercial real estate sector has continued to defy expectations since the EU referendum with both valuations and volumes of transactions growing significantly since 2016. Our insights have showed that Greater London’s commercial real estate transactions alone increased by more than 40% in value between 2016 and 2018 – generating an additional £10bn in annual sales – despite the volume only rising by 17% over the same period.
“The overall market slipped back slightly in 2018, which is sure to have been influenced by some investors and developers waiting for a Brexit breakthrough. Nevertheless, our insights paint a picture of a vibrant regional market for commercial real estate business. For example, areas like Walsall and Nottingham have seen a huge increase in the volume and value of commercial properties being transacted in the last two years.
“Looking ahead, the commercial real estate sector faces significant upheaval in the coming years. The demand for retail spaces is shrinking as high street customers move online. Demand for office space is equally on the decline as companies embrace remote working in an effort to reduce overhead costs. At the same time, there is an increasing trend of commercial properties being converted to residential property and brownfield land being redeveloped to boost much-needed urban housing supply.
“Some industry experts are predicting a rise in activity in the commercial sector once the Brexit uncertainty clears, but the longer-term disruption of the market cannot be ignored. Commercial real estate investors will need to innovate if they are to make the most of evolutions in retail, office and residential spaces. Understanding the potential and limitations of developments will be key to maximising profits and moving with wider trends.”