During the fall out of the global recession London office space proved a safe, popular
option for commercial property investors. However, investment
experts believe that the appeal of office space in the English
capital is now beginning to wane, with several investors now
hunting for hidden gems elsewhere.

Jason Baggaley, fund manager for Standard Life Investments (SLI)
has revealed that despite a strong period for London's real estate
sector, too much capital growth has been priced into prime Central
London properties.

Baggaley suggests investors are now looking toward short leases
as they represent a more lucrative opportunity than the
richly-priced Central London market.

"If you look at take up and demand, it's not great," added
Baggaley.

"There is a huge yield margin, of 200-250 basis points, on short
leases."

Mr Baggaley is not a lone voice in warning of the perils of
expensive Central London real estate. Although London remains one
of the most active commercial property markets on the continent,
further research conducted by PriceWaterhouseCoopers (PwC) found
London ranked 10th position out of 27 rival cities in
terms of new investment and performance of existing premises in the
eyes of brokers and investors.

Perhaps more telling is that London ranked in first position of
last year's PwC survey of the same market.

On the flip side many investors continue to view commercial
property in the capital as a prudent investment despite increasing
values of prime assets.

George Shaw, manager of the £918 million Ignis UK Property fund,
said: "The market remains polarised between London/South-east
compared with other regions and prime, versus secondary assets.

"Given the economic outlook, we consider the fund's focus
towards prime assets and its strong Central London exposure to be
advantageous."

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