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In the coming months on Valued Insights we are going to touch on the UK Business Park Sector, its current investment volumes, who the investors are and what’s driving them. While examining the current Business Park market as an investment vehicle, we are also going to consider the feasibility of the Business Park as a workplace of the future and if they will appeal to Millennial workers and beyond.
This blog series is by no means exhaustive, but it will hopefully provide a thoughtful precis and unearth some themes for ongoing discussion across the sector.
Part 2: The Business Park Series: The Investors.
In the first part of our series, we established that over 2017, total property investment volumes reached £65.48 bn for the UK, while £32.27 bn, or just under 50%, originated from overseas investors.
If we turn our attention purely to Business Parks, the numbers tell a very similar story, albeit on a smaller scale. Total property investment volume in the Business Park sector, reached £3.25 bn, while £1.814 bn (55.8%) was attributed to overseas investors.
Looking a little closer at the £1.814 bn attributed to overseas investors, the top two groups were the Far East (44.2%) and the USA (27%).
Who are these investors – and what is attracting them?
Notable Transactions in 2017
- In August last year, TPG Real Estate (US) acquired Arlington Properties and its UK business parks from Goodman Group and Legal & General, in the region of £450m. The portfolio comprised 250 acres of consented land and 57 buildings, occupied by the likes of Emirates Airlines, Centrica, Harley Davidson, Mondelēz, and Harley Davidson. At the time of the transaction it was considered that it represented a high-quality portfolio with a convincing opportunity for enhancement through asset management and development.
- In September last year –Singapore based Frasers Property International acquired a portfolio of 4 UK Business Parks (Winnersh Triangle, Chineham Park, Watchmoor Park and Hillington Park) from Oaktree Capital for £686 million, and agreed under a separate deal to acquire the Maxis Business Park in Bracknell for £57 million – subject to conditions. At the time of the sale Frasers justified the purchase of the parks as forming part of their overseas growth strategy, harnessing the synergistic benefits for their other holdings. They also noted the growth prospects of these properties, with rental income underpinned by long term leases to diverse and reputable tenants with long WAULTS. The size, depth and transparency of the UK property market was also a key factor.
Diversification is key. For these buyers, these transactions complement their wider strategies. Simply put, foreign buyers are motivated by more than just a paucity of investment grade office stock in Central London. While it is without a doubt that Business Parks are competitively priced relative to Central London and the UK’s Regional office centres, they offer scope for rental growth, aggressive asset management and substantial lot sizes. According to CBRE Research “High quality, well located buildings let to a strong tenant will outperform the rest of the market in 2018. Buildings with a lot size of circa £100 million are expected to see the most interest, especially from private investors’. This brings us to our third instalment – the future. In Part 3 of this blog we explore the fact that not all business parks are created equal, and examine what qualities they need to embody in order to become futureproofed workplaces.
Let us know your feedback
The National team has unparalleled experience of valuing business parks, building up specific market insight into the key parks across the UK. If you are interested in more details of this report and our Business Park series, please contact David Ingham, Director of CBRE National Valuation, or Virginia Woodger, Associate Director of CBRE National Valuation.