Bath Estate Agents

Investment Quarterly Q3 2023

Our research specialists, working with our national and regional investment professionals, have released the latest Carter Jonas UK Investment Quarterly report for Q3 2023.

Investment in UK commercial property has continued to fall in Q3 2023 as spending fell further in all but one of the main sectors. Investment activity in the office sector saw a marginal uptick quarter on quarter compared to other sectors.

£7.6bn was traded in Q3 2023. This was down 16% quarter-on-quarter, 45% below the five-year quarterly average, and was the weakest quarter for investment for more than a decade. The rolling annual total also fell notably compared to the previous six quarters and was 33% below the five-year average at £57.4bn.

Like the previous two quarters, investment was driven by the regional markets (UK excluding London). Just under 70% of all investment (excluding multi-regional portfolio deals) took place in the regions in Q3 2023, in line with the five-year average. The South East was the region that recorded the highest level of investment outside the capital, with circa £355m purchased in Q3 2023, followed by the East of England with just under £325m.

Conversely, investment in London accounted for 33.5% of the total, which was above the 23% recorded in Q2 2023 but broadly in line with the five-year average. The "flight to quality" accelerated by the pandemic continued to be a theme in the capital, especially in the office sector, where around 60% of the office deals were for prime assets. Overseas capital supported volumes in London, accounting for nearly 45% of the total, while in the regions, the share of overseas investment was 32%, which was above the five-year quarterly average of 23.3% and 26.7%, respectively.

The industrial and the office sectors accounted for the largest share of the quarterly UK total, with 30.3% and 28.6% respectively. Notably, the industrial sector recorded volumes closer to the five-year quarterly average than any others in the third quarter. Spending on alternatives amounted to 24.9% of the total, while retail investment accounted for 16.2%.


Office investment volumes picked up to £2.15bn in the third quarter, up 16% quarter-on-quarter but 50% down on the five-year quarterly average, as spending on regional offices cooled. No deals above £500m were recorded in Q3 2023, but several deals above £200 million were completed, all in the capital. The acquisition of Bloom Clerkenwell on Farringdon Rd for £217m by UBS was the largest deal in the third quarter. The purchase of Lion Plaza on 5 Old Broad St by Lion Plaza Propco, a private Vietnam-based investor, for £209m, at a 6% net initial yield, was another notable deal in Q3.


Industrial investment was down by 24% quarter-on-quarter in Q3 2023 to about £2.3bn. This decrease, particularly stark following the robust investment activity from 2020 to 2022, aligns investment levels with those seen in the pre-pandemic era. Several portfolio deals were completed, such as the acquisition of a logistics portfolio worth £248m by JD Property Group. Elsewhere, Strathclyde Pension Fund purchased Coventry Logistics Park for £140.4m, reflecting a net initial yield of 4.5%, while the US-based investor Barings acquired a portfolio of prime logistic assets for £165.9m, reflecting a yield of 4.3%.


Retail investment volumes eased in Q3 with the sector's headwinds, the cost-of-living crisis, and high inflation all affecting investors' sentiment for the industry. Retail investment was down 13% quarter-on-quarter, totalling just above £1.2bn, the third-weakest quarter for investment in the past five years. Several retail parks, shopping centres, and supermarket deals supported volumes. Realty Income Corporation acquired a portfolio of 11 retail parks and retail warehouses across the UK in a deal worth circa £200m. Other notable deals include the purchase of 171 New Bond Street by The Swatch Group for £76m and the Sainsbury's supermarket in Islington by DTZ Investors for £56.3m, reflecting a net initial yield of 4.4%.


Spending on the alternative sectors slowed sharply in Q3 2023. With £1.9bn spent, volumes were down 33% quarter-on-quarter and 56% down year-on-year. However, several hotel and student accommodation deals were completed in the third quarter. For example, the Israel-headquartered Menora Mivtachim bought five student accommodation buildings in Manchester, Leeds, Liverpool, Nottingham, and York for circa £500m, while the Dublin-based Dalata Hotel Group acquired Clayton London Wall Hotel for £53.4m.

Overseas Investment

  • Overseas investment in UK commercial property totalled £2.5bn in Q3 2023, down 37% quarter-on-quarter and 60% below the five-year quarterly average. Unlike previous quarters, spending in the regions notably outweighed that in the capital.
  • Spending by Far Eastern investors in Q3 2023 picked up from a weaker second quarter but remained 63% below the five-year quarterly average. Far Eastern investors had the second-highest share despite the weaker spending of around £700m. Supporting the volumes were several large deals, including the acquisition of Lion Plaza for £206m by a Vietnam-based investor and the purchase of The Chess Building by the Singapore investor CapitaLand Ascendas REIT for £125m.
  • US investment cooled in Q3 2023 following a strong second quarter. The amount spent by US investors in the third quarter totalled around £1.5bn, the weakest total since Q1 2019. American investors had the highest share of the total overseas investment despite the weaker spending. Notable deals include the acquisition of a retail park and retail warehouses portfolio by Realty Income Corporation for £200m and the purchase of a portfolio of prime logistics assets by Barings for £165.9m.
  • Swiss investors were also active after several quiet quarters and accounted for one of the largest deals in Q3 2023. UBS purchased Bloom Clerkenwell for £217m, while The Swatch Group acquired 171 New Bond Street for £76m.

The outlook from Ali Rana, Head of National Investment

  • Following 14 successive interest rate increases, the Bank of England's Monetary Policy Committee's recent decision to hold rates has sparked cautious optimism that we may have reached a peak. Nonetheless, with inflation considerably above the 2% target, an additional rate rise remains plausible should persistent inflationary pressures materialise. Moreover, the intensifying conflict in the Middle East raises concerns over its potential impact on fuel costs and subsequent inflation.
  • The decision to maintain interest rates has been widely perceived as positive, however, marking the removal of a layer of uncertainty that has pervaded for some time.
  • Although consensus suggests that a decrease in rates is unlikely until later next year, there is an expectation for an uptick in investment activity in 2024, especially if interest rates remain unchanged.
  • Expected overall volumes for the year are set to be lower than in previous years however, there are a range of buyers who have capital ready to be deployed and are seeking to take advantage of falling values and lack of competition.
  • Unsurprisingly the industrial and residential sectors continue to attract strong investor interest, a trend we expect to continue.
  • Investors refinancing this year will encounter risks due to higher debt costs, declining values, and stricter ESG requirements, especially for older office buildings.
  • Pricing for prime assets in desirable locations with solid ESG credentials is starting to stabilise This is where most of the investor demand is expected to focus. Values continue to fall for assets that do not match these criteria, particularly in the office sector.
  • Commercial real estate returns are expected to be based on genuine income return rather than on prospects of capital value growth.
  • Investor interest is expected to be broad, including domestic investors with significant capital ready for deployment. Strong interest is also anticipated from overseas, notably from US-based private equity and investors from Asia.

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Our contributors

Ali Rana
Partner - Head of National Investment
020 7062 3108 email me
Rad Radev
Associate Research Analyst
020 7518 3270 email me