■ January saw prime yields continue to hold at November levels but seven sectors reported downward pressures.

■ Apart from the usual appetite for London, good quality M25 offices, regional offices, industrial distribution and retail warehouses have moved up the hit list for investors.

■ In the case of regional offices, improvements in their occupational markets, lack of new supply and better value play, as opposed to central London, has intensified demand particularly from institutional investors.

■ This intensity of demand has resulted in some transactions achieving above their asking price as seen with SWIP's £34.5 million purchase of Sunlight House in Manchester, originally marketed at £28.5 million. We have also seen assets that could not be sold 18 months ago acquired off market below their previous marketing yield. Gazumping has also made a comeback.

■ This mounting demand saw transaction volumes reach a six year high of £53.6 billion in 2013. This was 60% up on 2012 and only 13% off 2006 peak levels. UK institutions accounted for 25% of volumes, an increase on their 2012 share of 20%.

■ However, despite this marked tick up in activity All Property capital values remain 28% off their peak. On a very simplistic basis there has been a strong historical correlation between investment activity and capital value movements. This appears to have disconnected in 2013.

■ Rising capital flows into the institutional funds combined with greater investor willingness to move up the risk curve should result in more pronounced capital growth in the regions this year. The disconnect between investment activity and capital value movements should therefore recede.

Taken from
Market in Minutes: UK Commercial February 2014