Record rise in islands for commercial office investment last year

D2 Real Estate has reported that commercial office investment volumes in the Channel Islands achieved a new record with around £220m. worth of stock traded during 2019 – up from £185m. in 2018.

High-value residents were the most active investors, along with overseas investors and syndicates. Given the demand, the prices achieved during the past 12 months have increased, closing the gap between the Channel Islands and UK.

In contrast, investment volumes in the UK regions fell by approximately 30% as investors delayed making decisions until the outcome of the British general election was known.

The research by the company also said that the Guernsey market appeared to be picking up, with investors and developers now having the confidence to buy sites again – hopefully signalling the start of the next cycle of development given the lack of available Grade A space.

‘I am very positive about the market in Guernsey, there has been a lot of activity over the past 12 months and sites that have lain dormant for many years have now been acquired by entrepreneurial developers,’ said D2 Real Estate managing director Phil Dawes.

‘Perhaps the most positive aspect over the last 12 months is the development of the next phase of Admiral Park, comprising a hotel, pre-let to Premier Inn, food and beverage units and a 30,000sq. ft office building. This would be the first office development in 10 years or so.’

He went on: ‘The investment market throughout the Channel Islands has been extremely strong over the past 12 months and prices are rising. If we are going to deliver high quality, environmentally friendly office stock, having an active and diverse pool of investors is really important, as rents are struggling to keep pace with building cost inflation, which is putting pressure on developers’ margins, so further yield compression is vital.’

In terms of the occupational markets, he said it appeared that Guernsey and Jersey operated in different cycles.

‘Letting activity fell significantly in St Helier during 2019, mainly because there is virtually no good quality stock left to let, despite the unprecedented level of development activity over the past few years. In contrast, St Peter Port’s take-up is broadly in line with the five-year average, however, given the volume of new and refurbished stock coming to the market, we expect take- up to be stronger in 2020.’

. More than £1.2bn of commercial property changed hands following the UK general election, with hopes that this ‘positive outlook’ will apply to the Crown Dependencies through 2020.

In the latest annual report of the Channel Islands Property Fund, chairwoman Shelagh Mason said: ‘The general election result has reduced some of the political uncertainty in the UK real estate market and has immediately increased the volume of transactions in what had previously been a sluggish environment, with over £1.2bn of commercial property changing hands between the election and the end of December, and research from CBRE highlighting over £32bn of overseas money targeting investment in the UK.

‘As the Channel Islands property market is closely correlated to the UK regions, the board is hopeful that this positive outlook will equally apply to Guernsey, Jersey and the Isle of Man over the next 12 months.’