Three “hot” areas for UK commercial property
DTZ says its new, forward-looking property index indicates that there are only three areas in the UK that currently offer commercial property investors attractive terms.
The group calculates these three areas as: office space in the City of London; prime retail property in Manchester; and retail premises in the West End of London, assuming they are held for the next five years.
DTZ created its Fair Value index based on 180 property markets worldwide. The group’s global head of research, Hans Vrensen, told The Times that although yields on City offices had dropped steadily, supply remained constrained. In particular, he noted, large floor spaces were hard to find, so DTZ is expecting to see rental growth coming through as the economy recovers.
The expected return on City office space according to the index is 10.9% compared with an estimated required return of 7.6%, making this a “hot” category – it implies that offices in the Square Mile are underpriced by 11.6%, according to DTZ. But compared with other European markets, the UK’s property market is relatively unattractive as yields have dropped during the past year or so. Hot global markets include Los Angeles retail property, Sydney offices and Antwerp industrial sites, the Times reports.
