Global property consultancy Cushman & Wakefield has revealed that over £2.9 bn (€3.2 bn) of assets were withdrawn from the UK commercial property market by the end of May, as the pandemic halted real estate deal flows.
According to the Cushman & Wakefield commercial real estate liquidity tracker, in April alone, £1 bn of assets were withdrawn from sale as the transactions climate worsened.
These figures compare starkly to the first two months of the year, which saw record levels of new stock come to the market with some £7.4 bn of assets put up for sale - an 86% increase on the same period in 2019.
However, as the Covid-19 pandemic impacted the market and restricted social interaction and viewings, stock offerings reached record lows – with just £630 mln offered in the past two months versus a typical monthly average of £2 bn.
Deals slowing
According to Cushman & Wakefield data, deal volumes have slowed and assets are taking longer to go under offer and complete. Assets have taken on average seven months to complete over the past three months versus six months for 2019, with assets now taking six months to go under offer in the last three months versus under five months in 2019.
Nigel Almond, head of data analytics, EMEA research at Cushman & Wakefield, said: 'We see variations in pricing across asset classes and geographies. Industrial and logistics remains in vogue and continues to trade at a premium of 1.3%.
'Offices are trading roughly at a par to quoting. Regional offices outside London, the South East and East of England are even trading at a marginal 0.8% premium. Central London offices have seen trades at a marginal discount of 0.8% to quoting, with prime assets trading at quoting supported by stronger demand and lack of stock, and a broad range of underbidders.
'The structural change impacting retail long predates Covid-19 and assets have been trading at double-digit discounts to quoting of 12% with supermarkets the only shining light amidst the wider gloom with trades at a more marginal 3%.'
Brighter outlook
However, the outlook is not all bad, according to Jason Winfield, head of UK capital markets at Cushman & Wakefield, who said: 'Buyers looking for big discounts in the wake of Covid-19 are likely to be disappointed. As we saw after the vote to leave the EU, sellers seem willing to hold out and wait for a better price later in the year when some stability is expected to return to the market, rather than accept any chip on pricing now.
'The strong fundamentals that underpin the appeal of commercial real estate assets as a whole have changed very little and once travel restrictions are lifted, we can anticipate an uptick in activity albeit with reduced transaction volumes.'
