According to a new IPD capital growth index, commercial property investment in the UK now stands at £13.8 billion.
Even though there was a decline of 0.04 per cent in investments in April, compared to the month earlier, this caused no major shifts in the sector. Offices have continued to perform the best for yields, whilst retail units are still very risky for potential buyers. In total, £13.8 billion of investment now stands in the sector, which is much higher than the £13.2 billion that was recorded this time last year, even if activity slowed down in the second quarter.
Interest has particularly grown dramatically in the City of London, with Salesforce's recent occupation of the Heron Tower and Amazon taking up 190,000 sq ft at Holburn Viaduct.
Industrial analysts have suggested that lending may take a hit in 2014, even if signs suggest that it is set to improve. With interest rates rising, many property loans are expected to default, meaning that banks will have to sell their assets in order to be financially clear for potential repossessions. Therefore, it is still a long way until a clearer picture on the market is established.
Other ways in which companies can clear their debts will be when money is naturally injected into opportunity funds and private equity, hence debt can be bought from banks at sharp discounts.
As interest rates rise, analysts will be hoping that the economy will be on the way to recovery so that direct property investment sees a healthy boost. If anything, property defaults should be shifted into other markets, allowing the commercial sector to shine in 2013. How close to the truth this actually will be remains to be seen.