Secondary property to outperform by 2014 – DTZ
Total returns from secondary property are set to outperform those from prime by 2014, after turning positive once more next year, says DTZ. The firm’s latest research into the pricing of secondary commercial property in the UK says that offices will lead the recovery, supported by the strength of the Central London offices market.
A fall in risk aversion will drive the recovery in secondary values, DTZ says, and this will be supported by economic recovery, which will stabilise secondary rents. While secondary values are expected to turn positive in 2013, they will remain subdued by continued pressure on capital values. In 2014, DTZ expects secondary returns to start to outperform prime, due to higher income return.
The falls in secondary capital values since the onset of the economic downturn, which have reflected falling rents and rising yields, have created a richer set of opportunities for investors, DTZ says. “With pricing at a lower level, upside and downside risks to the outlook are more evenly balanced than they were a year ago,” the firm adds.
