Buyers & sellers: overseas buyers return
Volume across all buyer types remained significantly below trend, although overseas investors came back strongest in Q3.
OVERSEAS DOUBLE UP
At £2.8bn, total investment from overseas buyers in Q3 was double the record low of Q2 but was nevertheless very subdued, at 56% below the five-year quarterly average. Overseas investors were also the only net buyers of note in Q3, with net purchases of £1.9bn, three times greater than Q2.
For the second consecutive quarter, Far Eastern investors accounted for the leading share of overseas volume at £1.2bn, only 39% below trend. The bulk of this was invested in London, including 25 Cabot Square, Canary Wharf and the Morello II BtR scheme, Croydon.
INSTITUTIONS LOOK FORWARD
Despite many of the funds remaining gated, institutional investment rebounded by 45% in Q3 to £1.4bn. With institutional sales at a similar level to purchases, their net position was neutral in Q3. Q3’s largest institutional purchase was Columbia Threadneedle’s £370m of the MAGIAL portfolio from the Manchester Airport Group.
A third of institutional volume comprised forward funding agreements. Notable deals included Pension Insurance Corporation’s £130m forward funding of a 520-unit BtR scheme at New Victoria, Manchester; and Royal London’s £80m forward funding of a retirement village at Audley Wycliffe Park, High Wycombe.
REITS IN AND OUT OF RETAIL
Quoted propcos were the only key buyer type to see volume fall even further from Q2’s low. At £621m, Q3 volume was 50% below trend.
Sales of £1.3bn placed quoted propcos as the second largest net seller in Q3, almost half of which comprised retail assets, reflecting the growing distress in the sector.
However, almost a third of quoted propcos volume was invested in retail. This was largely accounted for by Supermarket Income REIT’s £189m of supermarket buying in Q3, which took their total investment in 2020 to date to £325m.
SELLING THE DREAM
Private propcos continued their trend towards selling in Q3, with total sales of £1.6bn and net selling of £785m. In a break with the norm, a key driver of sales activity was the forward funding of BtR and PRS schemes, including the aforementioned Lewisham Gateway; Ashley Road, London; New Victoria, Manchester; and Candleriggs Square, Glasgow.