A RECORD-breaking year for investment in commercial property in the South West is on the cards as major investors become increasingly attracted to the region - according to new research by national commercial property consultancy Lambert Smith Hampton (LSH).

Investment in the UK’s commercial property sector during the third quarter of 2014 reached £16.3bn - a 37% increase on the previous quarter and 41% higher than in the corresponding period last year.

In addition, the latest edition of LSH’s UK Investment Transactions report reveals that investment in the UK regions totaled £6 billion in the past quarter, the highest level since 2006. It is also the first time that investment in the regional markets has outstripped inflows into London since the start of 2011.

In the South West, third quarter figures show that £0.97 billion has been invested in the region so far this year – a huge increase on the £0.57 billion invested in the same period last year.

Darren Sheward, head of office for LSH in Bristol and the South West, welcomed the figures: “South West investment volumes reflect a significant upturn in sentiment amongst investors who have recognised the excellent opportunities the region has to offer.

“With an expectation of rental growth in the office and industrial sectors, and strong investor interest in alternative markets in the region, 2014 will be a record-breaking year for the region.”

The report finds that nationally transaction yields have risen slightly from 6.06% to 6.13% in the past quarter, although they continue to move inwards on an annualised basis. Average capital values have increased by 10-12% over the past 12 months.

Ezra Nahome, CEO of LSH, said: “We continue to see high levels of competition among investors for UK commercial property, which looks set to enjoy a record year in terms of returns and investment volumes.

“Investment during the first three quarters of 2014 has already hit £39.1bn and is on track to break through the £50bn mark before the end of the year.

That’s a significant milestone when you consider that annual investment inflows barely reached £30bn as recently as 2012.

“London continues to perform strongly and will remain the most important market for some investors. However, capital continues to flow back into the regions in a meaningful way as improving confidence and the price of assets in London prompts investors to look beyond the capital.

“In addition, the returns being offered in some of the secondary markets remain attractive to investors wishing to take advantage of the higher yields and positive occupier sentiment.

“However, yields are below average in many sectors and this, coupled with some uncertainties surrounding the forthcoming General Election and a possible interest rate rise, means the pace of increases in capital values is likely to slow significantly in the next 12 months.

There is still scope for further increases in capital values, but these will be mainly driven by rental growth rather than further inward yield shift.”