Last year was an exceptional year for commercial property investment in the Channel Islands, according to D2’s latest Office Market Review.
Over the 12 months from January to December 2017, more than £150 million worth of assets were traded across Jersey and Guernsey. The year also heralded the return of Middle Eastern investors, with the acquisition of 37 Esplanade, Jersey, for £45 million.
Take-up in Jersey exceeded 200,000 sq ft – a five-year record and, in terms of take-up as a percentage of total stock, comparable to some of the major UK regional cities.
Occupational demand in 2018 for grade A space across the Channel Islands looks robust, says the review, although in Guernsey there’s a lack of available grade A space.
Prime headline rents in both Jersey and Guernsey have remained stable – Jersey at £35/sq ft to £40/sq ft, dependant on the lease terms, and Guernsey slightly higher at £38/sq ft to £44/sq ft, given the shortage of supply of grade A on the island.
D2 Managing Director, Phil Dawes, commented:
“With global commercial property investment yields at all-time lows, investors are looking to alternative markets for yield and value. This is why UK regional office prices and volumes have increased over the past 12 months, as yields in London and overseas have contracted.
“Given the close relationship between the UK and the Channel Island property market, this demand has filtered through.
“In general, Channel Island office investments offer long lease terms, less rental volatility and strong covenants, and yet the yields are currently at a discount to the UK. For example, UK regional office yields are now sub-five per cent compared with six per cent in the Channel Islands.
“This provides a compelling investment case, and we expect the yield gap to shorten in 2018, particularly given the quality of the investments coming onto the market in the near future.”