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31 July 2019

Christie & Co publishes latest report on UK Alternatives investment yields

Investor appetite for UK Alternatives remains incredibly high, with investors attracted by the security of commercial real estate and returns which remain in excess of those available from bonds and debt markets, according to the latest report on Alternative investments in the UK by specialist business property adviser, Christie & Co.

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The report, UK Alternatives Investment Index H1 2019, provides an overview of currently achievable yields on prime and secondary investments across various subsectors within the healthcare, childcare, medical, hotel, licensed, retail and leisure sectors, and finds that the average yield on prime investments across UK Alternatives as a whole ranged between 3.5% and 7.5%, although the picture was diverse between sectors.

Key findings of the report show that yields have generally continued to tighten across the majority of the evaluated sectors, as UK Alternatives continue to mature. This has additionally led to a greater appetite for risk amongst investors, with an increasing number willing to tolerate higher levels of operational risk in exchange for enhanced returns.

Despite a reduction in M&A activity in Q1 2019 due to short term capital market challenges, largely a result of political turmoil over Brexit, Christie & Co reports activity stabilised in Q2 as investors became increasingly confident in the opportunities presented by the current perception that UK Alternatives in some sectors represent good value. Strong economic fundamentals in the UK, reduced vacancy periods, stable income streams and ongoing supply side constraints have encouraged the deployment of both institutional and private capital.

Lead author and director, Ramzi Qattan, comments; “Whilst our specialist sectors have reached varying degrees of maturity, common themes exist; namely that the level of interest is on an upward trajectory and prime yields have compressed as a result. In sectors that remain relatively unconsolidated, the volume of investment grade stock that will appeal to institutional investors is in relatively short supply, although as sectors continue to mature in the coming years, and become more corporate, this will evolve rapidly.” 

Christie & Co’s Head of Leisure and Development, Jon Patrick, added; “As private equity, real estate investment trusts and specialist investment managers increasingly follow long-income opportunities and new covenants seek to gain a foothold in key operational locations in the UK, we are experiencing good levels of demand for new build developments, both on a forward fund and forward commit basis.”