According to Colliers, investment volumes in March reached £4.5 billion, compared to £3.9 billion in February.
The first quarter figure therefore stands at £13bn, up 10% on the corresponding 2021 figure and in line with the 10-year first quarter average.
Cross-border capital accounted for nearly 60% of all activity in the quarter. American and Asia-Pacific investors have been particularly captivating, as the easing of travel restrictions attracts global capital to the UK market.
The three largest deals in March by value were London office 5 Broadgate (£1.2bn), a logistics portfolio (£550m) and a student accommodation portfolio (£306m). Yields are compressing across most sectors, especially for prime assets in prime locations.
Oliver Kolodseike, head of economic research at Collierssaid: “The first quarter of the year saw investment levels largely return to pre-pandemic levels across the various sectors. The current headwinds in inflation, interest rates and Rising cost of living will undoubtedly impact Q2 characteristics, especially for retail as demand for goods may fall.
“Despite this, there is a significant weight of capital looking to enter the UK property market and I do not expect there to be a decline in investment levels this year.”
Just over £2bn was traded in the office sector in March, building on the £2bn and £1.2bn recorded in January and February respectively. Excluding the traditionally strong fourth quarters, the £5.2bn traded in the first quarter was the best quarterly figure since 2018.
Around £1.3bn was traded in the industrial sector in March, down from £1bn in February and more than the vast majority of all pre-Covid monthly figures.
Monthly retail investment volumes slowed from an already weak £300m in February to just £170m in March, the weakest monthly figure since April 2020. Nonetheless, the figure for the first quarter of £1.4 billion is an improvement on 2020 (£1.1 billion). and 2021 levels (£1.2bn) thanks to a strong January.
Around £930m was invested in the alternative and mixed-use segments in March, down slightly from the £1.1bn traded in February. The purpose-built student accommodation (PBSA) sector attracted £430m, up from £260m the previous month.
Paddy Allen, Head of Operational Capital Markets at Colliersadded: “Investment in PBSA nearly doubled between February and March as the sector continued to be popular with global capital looking to increase exposure to ‘bed-backed’ sectors.
“We are seeing increased levels of dry powder looking to grow in PBSA and Build to Rent, with resilience and favorable demand and supply imbalances continuing to make PBSA a priority for investors.”