Total UK commercial property investment volumes in Q2 2020 are set to have dropped by 72% compared to Q2 last year, estimates Savills in its latest Market in Minutes report, but April and May’s fall in capital values were smaller than expected, signalling that the market may have got to grips with the initial shock of the Covid-19 crisis.
Savills says that Q2’s estimated investment volume is set to be approximately £2.75 billion, a 35% drop on the previous lowest quarter recorded (Q1 2009), and unsurprisingly a large fall on Q1 2020’s volume of approximately £12.7 billion due to the impact of the pandemic.
The international real estate advisor goes on to say that the latest UK ‘all property’ capital value growth data shows a sharp downturn in March (-2.4%), but less severe monthly falls in April (-1.8%) and May (-1.2%), which is surprising as in the GFC period from the end of 2007 onwards an month-on-month reductions in capital values increased. The year-on-year fall in 2020 is currently 7.4%.
James Gulliford, joint head of UK investment at Savills, says: “Looking at capital values on an annual basis, the numbers by the end of Q3 2020 will begin to show a levelling out. March brought the third largest monthly fall for 10 years but encouragingly April and May data shows less severe drops and we’re likely to see month-on-month falls recede back to the -0.4% per month, as seen in recent recessionary periods. In terms of quarterly investment volumes it’s no surprise that Q2, and by implication the first half of 2020, are well down on last year, but again there are some encouraging signs in the market and we hope that the traditionally quiet summer period will see some of the suppressed demand for UK property begin to come through.”