According to many industry experts, the London commercial
property boom could soon start to decline, with true value on
investment more likely to occur elsewhere.

Ryan Hughes, fund manager at Apollo Multi Asset Management,
said:

'A lot of the value in London, particularly central, has
gone.  There have been a lot of foreign buyers moving into the
market over the past couple of years, which has driven yields right
down.'

Guy Glover, manager of F&C UK Property, added:

"While we do have some London investments, we are much more
regionally-focused, where there is less capital enhancement but
also much less volatility. About 85-90% of the portfolio's income
comes from outside London."

For many investors, the routes out of London and in the
recently-named 'Northern Powerhouse' offer more value, with
property available in cities such as Birmingham, Leeds and
Manchester.

Hughes continued:

'As the economic recovery ripples out from the South East these
markets are playing catch-up to how the London market has moved
over the last two years, and there are some which are yielding
6-7.5% and have very strong tenants.'

Prospects are bright on a regional view - to the extent that
rents could potentially increase by up to 22 per cent in the
future- Glover has taken a more individual asset-orientated
approach.

"We tend to look for individual buildings and how they are going
to perform, rather than taking a sector view," he said.

"Eighteen to 12 months ago rents were fairly static, but we are
now seeing 3-4% improvements per annum coming through. This is
because there has been very little regional supply of new stock
over the past seven years, and now the improving UK economy is
leading to competition for space between companies that are
expanding.

"The M4, Manchester, Edinburgh, Birmingham - all of these areas
are seeing growth, and rents could increase by around 22%. Property
is not only producing a nice income return, but also capital growth
stemming from yield compression."

 

 

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