PAI National Investment Group Meeting – June 2020

With all corners of the UK represented, the PAI Property Investment Group met again on the 11th June to discuss the emerging market trends and introduce new and forthcoming investment deals between the Group.

Chaired by Tim Bradford from Lincoln based Banks Long & Co, 18 Member Firms were represented with many more members connecting into the Zoom meeting.

In contrast to the May meeting the discussion moved from damage limitation for Landlords and Investors to early signs of the “new normal” emerging for the commercial property investment market.

Early indicators suggested that:

1.  Acceleration of the contraction and further rebasing of High Street rental values – although restructuring deals concluded during the lockdown in some strong centres suggested that the percentage fall may not be as deep as originally forecast.

2.  Retail Parks – more defendable from an investment perspective; especially those with limited F&B representation.

3.  Industrial – strong investment demand has remained during the lockdown period – average UK yields for Quarter 1 set at 5% - no signs of movement - shortage of stock – indeed our member for Stevenage, Colin Mitchell of Brown & Lee, reported that there were no industrial/warehouse units available in the Stevenage area, either for sale or to let at present.

4.  Office – this sector will see structural change from the Covid-19 event – home working, satellite offices and cheaper locations will become more common.  Too early to assess the true picture. 

5.  Medical investments – strong demand – yields holding at pre-Covid levels – limited number of specialist buyers. 

6.  Student accommodation – there could be an over supply in this market as foreign student admissions dry up. 

7.  Hotels – this sector will face a challenging period although the Premier Inn covenant remains strong but the Travelodge CVA will impact on the whole Travelodge portfolio with a significant upward shift in the yield for this particular hotel brand.

Picking out some sound bites from the meeting:

“Unlike previous recessions, this recession has not been created by a financial downturn – so far there has not been as much distress in the property market”.

“Frustration as the legal stages of concluding deals is taking much longer due to the reduced staffing levels as solicitors’ furlough large numbers of their workforce”.

“Markets are re-emerging but are generally still stagnated”.

“Recent deals suggest limited softening of yields in the Midlands region”.

“Industrial enquiries remain at pre-Covid levels”.

“Likely to see growth in urban logistics as large population centres require warehousing strategically located to speed up delivery times to customers”.

“Construction sector very busy – issue with supply of building materials keeping up with demand – the trade sector remains one of the strongest investment sectors”.

The Group exchanged large numbers of deals during the two hour meeting and it was clear that there were definite green shoots of market activity returning with Members keen to start generating new opportunities for their wide-ranging investor clients.