Peripheral real estate markets in London are gaining favour with investors on the back of a growing technology boom, according to a new report from IPD.
Peripheral real estate markets in London are gaining favour with investors on the back of a growing technology boom, according to a new report from IPD.
Whereas traditional investors such as pension funds and high net worth buyers from the Middle East and Asia favour assets in the City and West End due to their ‘trophy’ status, an emerging trend has seen peripheral locations across London gain serious momentum.
The Northern Fringe (Shoreditch and Spitalfields) delivered the highest returns in the capital last year, at 23.0%, with other peripheral markets like Camden (Kings Cross) and Paddington delivering 18.5% and 18.3% respectively - well above the London average of 14.2%.
Facebook taking space at Euston and Google at Kings Cross are the most high-profile names in a shift towards technology, telecommunications and media tenants - with these ‘new’ firms taking space acting as key levers for investor interest in ‘new’ districts, IPD said.
The London Markets Report, published by IPD and Levy LLP, is the first major study into the performance of 20 of London’s ‘micro’ markets, measuring over £42bn in assets across the capital.
It shows some West End real estate also delivered extremely high returns, particular the ‘NoHo’ district north of Oxford Street, which returned 19.2%, with Mayfair close behind at 18.5%. Despite major development activity, performance fell to 11.3% in Victoria.
However, returns for the City, one of the largest London markets, were just 12.1%.
Phil Tily, IPD executive director and head of UK and Ireland, said: 'London is the single largest real estate investment location in the world, but it is all too easy to forget the massive difference in performance from one district to the other.
'Although high levels of interest from cash-rich investors has edged out traditional funds, who are more focused on strong income returns, many locations still benefit from strong tenant demand - after all London remains the power house of the UK economy, and as such there are new areas of demand emerging across the city.'