Average business property prices once again increased across all sectors, according to the latest report, Business Outlook 2017, by specialist business property adviser, Christie & Co.
Christie & Co indentified one of 2016’s main trends to be an increase in interest in UK markets from overseas buyers – particularly those from China and wider parts of Asia – notably in the care, hotels, childcare and pubs sectors. This is partially due to the Brexit vote, which led exchange rates to improve for foreign purchasers.
However, as 90 per cent of UK business property sales are still to buyers within the same geographic area, this has meant that Brexit has had little impact on domestic transactions thus far. However it remains to be seen what the longer term effect will be on the wider market ahead of the triggering of Article 50.
Despite all of this, average prices across all the sectors in which Christie & Co specialises increased further in 2016. These are as follows:
Pharmacy: + 12.0%
Dental: + 14.9%
Care: + 5.0%
Childcare: + 9.7%
Retail: + 8.8%
Pubs: + 4.4%
Restaurants: +14.1%
Hotels: + 6.0%.
Richard Lunn, managing director – care at Christie & Co comments, “Cost increases such as the introduction of National Living Wage, the recruitment and retention of qualified staff and added regulatory burden all continue to squeeze care operator margins across the UK.
“In December 2016, 26 per cent of care homes were rated as requiring improvement by the regulator and worryingly, two per cent rated inadequate. With many owners being forced into closure by lack of funding support, the recent announcement that local authorities will be able to raise council tax by three per cent over each of the next two years to fund social care is a positive move for care businesses, albeit a short term solution.
“Looking ahead to 2017, we anticipate a busy year with more portfolio activity and continued churn by corporate operators with an increase in larger portfolio transactions and refinances likely. The market for quality homes remains robust, with many operators and investors chasing the limited supply of newer purpose-built or remodelled services, and values for this type of stock have remained strong.
"The reduction in the value of sterling has made the UK market more attractive to overseas investors, in particular China and Malaysia together with existing interest from American REITs and operators, and we therefore expect interest from foreign buyers into the UK care market to increase in 2017.”
David Rugg, chairman at Christie & Co comments, “2016 was a complex series of twists and turns on the economic front and saw operators having to adapt to a raft of new legislation, all of which have taken their toll on businesses across the UK. However, we are pleased to say that the sectors in which Christie & Co deal have longevity, and will remain a focus for operators and investors for the foreseeable futures.”
