By Legal Futures’ Associates Search Acumen [1]
- On average, commercial buyers of real estate in England and Wales spent £249m each day during the first eight months of 2019 – a drop of more than 7% over two years from £270m in 2017
- The biggest spending day of 2019 so far is down by more than £120m compared to the busiest day from 2018 and down 37% on the biggest day from 2017
- Only nine of the 50 busiest days for commercial spending since 2016 have occurred this year
- Daily transaction volumes are down by more than 7% annually from 2018 and almost 8% from 2017
- While daily transactions dwindle, £50m+ transactions and £100m+ are up as appetite for mega commercial deals remains in the face of Brexit uncertainty
Brexit uncertainty has contributed to a £20.6m drop in the daily amount spent by commercial buyers on real estate transactions across England and Wales since 2017, as the property market stutters through a challenging year according to the latest report from property data insight and technology provider Search Acumen.
Using the latest available HM Land Registry (HMLR) data, its analysis shows that commercial buyers across England and Wales have spent an average of £249m every day from January to August. This is down by 6% from the equivalent period in 2018 when £265m was spent each day and down by nearly 8% from £270m in 2017.
The effect of Brexit uncertainty on day-to-day commercial real estate business is clear in the data. In 2017, the busiest day of the year – 12th October – saw £4.9bn spent by commercial property buyers: 37% more than 2019’s biggest day so far which saw transactions worth £3.1bn completed on 29th July. 2018’s busiest day also registered 4% higher with £3.24bn spent on 26th November.
Furthermore, only nine of the top 50 days from 2016-2019 for commercial property purchases by amount spent have occurred this year. So far, there have only been five days in 2019 where more than £1bn was spent on commercial real estate, compared to 11 in 2018 and 10 in 2017.
Volumes suffer along with transaction values
There have been 399 commercial real estate transactions on average per day in 2019 between January and August, down 5% from 420 in 2018, and down 7% from 429 in 2017. Only seven of the 50 busiest days for commercial real estate sales by volume since 2016 have happened so far this year.
FIGURE 1 – TOTAL DAILY VALUE OF COMMERCIAL PURCHASE OF REAL ESTATE, 2016 – 2019 YTD
Source: Search Acumen analysis of HM Land Registry data
When assessing the busiest days of the year for transactions, this year’s current high of 2,668 transactions on 28th June is down 10% from 2017’s busiest day (2,996 on 31st March) but up more than 9% on 2018’s busiest day on (2,951 on 31st August). The busiest day for commercial real estate transactions on record at HMLR – 31st March 2016 – saw more than double the transactions (5,961) of 2019’s busiest day: a result that was impacted by a rush of buy-to-let purchases ahead of a stamp duty rise for landlords and second home buyers.
Mega commercial deals still in vogue despite 2019 downturn
While daily transaction activity has been hit by Brexit uncertainty, appetite for the largest commercial property deals remains.
HMLR figures show £100m+ transactions are at their highest level of recent years, with 65 deals for £100m+ recorded in England and Wales so far this year – up 30% on the 2018 full year total of 50 and also up slightly on 2017’s full year total of 63. While £50m+ transactions are yet to reach the same levels for 2019, they still make up a bigger percentage of commercial activity this year than in either 2017 or 2018.
However, while mega commercial real estate deals have continued to be transacted in 2019, deals over £1m in value have fallen. Only 7,443 deals valued between £1m and £50m have been transacted during the first eight months of 2019, just 56% of the 13,238 completed during the twelve months of 2017.
FIGURE 2 – VOLUME OF COMMERCIAL REAL ESTATE TRANSACTIONS BY VALUE BAND, 2016-2019 YTD
Source: Search Acumen analysis of HM Land Registry data
Market commentary
Caroline Robinson, Commercial Real Estate Business Development Manager, Search Acumen, comments:
“Politicians have frequently told us how bad things could be without a Brexit decision, but the commercial real estate sector is already feeling the pain of indecision every day. Our study has likely only confirmed what the industry has known for a while – 2019 has been a year of ‘wait and see’ as more transactions have been cancelled or put off until after the General Election and the Brexit decision has been made. Simply put, less commercial real estate business is being done this year as so much about the country’s economic outlook and future remains up in the air.
“However, while we all wait for a Brexit outcome to release the bottleneck that the political situation has created, it is heartening to see that ‘mega’ commercial deals of more than £50m and £100m are still in vogue. This tells us that there is still plenty of confidence in the UK real estate sector and that for those who can be a part of such a large scale of development and sale, business is still good.
“With indecision likely to remain into 2020, now is the opportunity for firms in the commercial real estate sector to assess how they can be best placed to take advantage of an eventual upswing in the amount and volume of transactions. Today, too much real estate business still takes place on paper and is hugely inefficient. But, by integrating big data and smart automation into transactional processes that haven’t changed in decades, developers, planners and their lawyers can elevate themselves into a consultancy role.
“The smartest real estate firms are gearing up for more business in 2020 by looking at how to make real estate transactions faster, more accurate and more conducive to 21st century business. Those that can offer clients a faster and simpler way of transacting property will be well placed to win. The full digitisation of the real estate industry is the future, so the time to act is now.”