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Investment in M27 corridor almost doubles in a year

January 20, 2010

Research shows that after a subdued 2008, investment activity in the M27 corridor picked up during the last 12 months.

Research shows that after a relatively subdued 2008 particularly in leasing terms, investment activity in the M27 corridor picked up during the last 12 months, reaching £117.7m by the end of the year, almost double the total of £59m for 2008.

The twice yearly Southampton MarketView report by CB Richard Ellis shows that the largest investment deal for 2009 was at Solent Business Park.

This was where Israeli investor Igal Ahouvi purchased five office buildings totalling 258,300 sq ft for £55.5m.

The buildings are currently let to National Air Traffic Services until 2023 at an estimated rent of £18 per sq ft, reflecting an initial yield of 7.75 per cent.

There were two other transactions at Solent Business Park, both at the Zurich Centre.

Buildings A and B were purchased by Hildane properties for £22m reflecting a net initial yield of 7.96 per cent and Building C was purchased by Legal & General for approximately £14.5m which reflected an approximate yield of 6.75 per cent.

Another major deal in the area was NICE House, Tollbar Way, Hedge End where a private investor paid £4.85m for the 34,900 sq ft building reflecting a net initial yield of 10 per cent with five years remaining on the lease.

James Brounger, deputy managing director of CB Richard Ellis' South Central Region commented: 'Looking ahead, although investor sentiment has undoubtedly improved, it is unclear as to whether this will directly translate into an increase in transaction volumes.

'With the credit markets still recovering from the recent downturn, equity-backed investors are expected to remain the key driver of activity.

'Demand on the leasing side is predicted to remain subdued during 2010 with activity likely to be driven by tenants who will be able to reduce their occupational costs by taking advantage of the excellent lease terms on offer.'

Source: The News