PRS yields around the UK hardened in Q2 2015 as a weight of capital targeting limited investment opportunities continued to drive up pricing.
According to CBRE’s quarterly benchmark data, yields dropped by 25bps in almost all markets measured, with transactions increasing notably in regional markets.
Jason Hardman, senior director at CBRE, said that while there had been fanfare around London and the South East, interest was now spiralling elsewhere.
“There is a growing trend towards development opportunities in large towns and cities with sizeable business districts and employment populations.
“London and the South East are top of most investor’s lists, as they have the strongest long -term fundamentals and stability, but they are much more difficult from an acquisitions perspective.”
The rising number of developers entering the market with funding already identified and allocated has put increasing pricing pressures on forward- funding opportunities around the UK.
Hardman added: “Yields have moved in and in the context of a low-yielding asset class that movement is significant and reflects the fact that the market is very strong.”
Gross yields in regional centres are still significantly higher yielding compared with London and south eastern stock, with a gap of more than 75bps on prime stock.
