The London retail market is priced 19.8% over fair value and Leeds and Manchester represent the best value in the UK for commercial real estate investors.
The London retail market is priced 19.8% over fair value and Leeds and Manchester represent the best value in the UK for commercial real estate investors.
These are two of the key findings of a new report by property services firm DTZ which looks at comparative property prices for 10 major UK cities in the office, industrial and retail markets. It finds London retail the most overpriced, at 19.8% over fair value, followed by Cardiff retail (5.4% over fair value) and Nottingham retail (4.4%).
According to DTZ, Leeds industrial is the best proposition for investors at -14% below fair value, followed by Manchester retail (-13.4%) and Leeds retail (-13.3%).
DTZ investment director, Greg Davison said: ‘The opportunity to generate above-average returns from commercial property within Leeds is largely unique within the UK, insofar as it occurs across all of the key market sectors. Backed up by the strong local economic growth outlook and market restrictions due to a limited development pipeline, Leeds offers investors a compelling story.’
Fergus Hicks, DTZ’s global head of forecasting, added that, ‘Apart from Cardiff retail, we think all of the markets outside London are still around or below fair value, making them attractive to investors. In London the picture is more mixed. Ultra low yields make London prime retail look overvalued, while we think industrial property is around fair value. However, there are still opportunities in the City, West End and midtown office markets, which we think are around fair value.’
With interest rate rises predicted for 2015, Richard Yorke, head of UK research, said: ‘investors will increasingly look beyond prime in the UK and towards other European markets.’
For the full report, click here.