Bloomberg News

Bias for London Property Drives Yields Higher in Rest of U.K.

May 02, 2013

Investors that bought U.K. commercial property outside of London this year generated returns that were a third higher than assets in the capital as a lack of competition pushed down prices, according to research firm International Property Databank Ltd.

Yields on offices, shops and warehouses purchased outside of London were 6.5 percent for the year through March, compared with 4.3 percent in the city, IPD said today in an e-mailed statement. That’s the widest margin since June 2007.

Investors trying to avoid high prices in London are looking to cheaper real estate outside the capital as a six-year decline in values slows, IPD said. The amount of commercial real estate investment in central London last year surpassed the rest of Britain for the first time as overseas buyers preferred the U.K.’s largest city, broker DTZ said in a report yesterday.

“The decision now for investors is how much risk they are willing to tolerate,” Greg Mansell, head of research at London- based IPD, said in the statement. Regional properties “can hold their own when in the right hands,” offering better income and value growth than London.

The value of regional commercial real estate fell 0.9 percent from January through March, a slower decline than in 2012, IPD said. Properties in “second tier” cities such as Birmingham and Leeds had yields of about 7 percent after values dropped by about 42 percent.

To contact the reporter on this story: Patrick Gower in London at pgower@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.


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