Despite continuing economic uncertainty, sentiment among large portfolio landlords is running high, with a majority planning to acquire at least one new asset in the coming year.
"The bottoming out of commercial property prices in Q1 2023 corresponds with reasonably positive sentiment expressed towards the sector in this survey"
The Handelsbanken Professional Landlords Survey – based on nationwide research among large UK investors with an average of 29 properties worth c £14 million each – found that 59% plan to expand their portfolios in the year ahead, underlining their confidence in the long-term value of UK property as an asset class. Just 14% expect to sell some or all their properties.
57% of those looking to buy more properties also plan to diversify into new sectors, with offices (43%) attracting the most interest as investors look to take advantage of depressed valuations.
92% of respondents expect the value of their portfolio to increase over the next 12 months, with 39% predicting it will grow by over 20%. Only 8% thought it will broadly stay the same.
James Sproule, UK Chief Economist, at Handelsbanken said: “The bottoming out of commercial property prices in Q1 2023 corresponds with the reasonably positive sentiment expressed towards the sector in this survey.
“Commercial property values saw a major correction in the second half of 2022 as a direct impact of the higher interest rate environment. Average retail property prices were down by 15%, office prices were also down by 15%, and industrial unit prices were down by 25%.
“In addition, there are the ongoing considerations around post-pandemic working practices and retailing habits which, until they are more settled, will be weighing on commercial property valuations.”
Geographically, three-fifths of respondents expanding their portfolio are also planning to buy in new regions. London was cited as the most attractive region over the next 12 months by investors (27%), followed by the South East (26%). Areas seen as less attractive for property investment are Yorkshire and the Humber and the West Midlands, both attracting interest from only 9% of the sample.
Danielle Coe, Leamington Spa branch manager, said: “As we can see from these results, there's a regional variation in landlord sentiment. The findings highlight how important it is to know the area where you are planning to invest, especially as we can see landlords say they're looking to diversify geographically.
"Because our branches are located in the areas we serve, we have a deep knowledge of the local market and are able to offer property professionals informed advice to allow them to make decisions that work for them. Our customers are telling us that they find it a real benefit to have this expertise 'on their doorstep'.”