EXPO: Demand for regional property will be “supercharged” by the devolution of fiscal and other powers to local authorities prompted by the recent Scottish referendum, according to GVA.
The property services firm’s chief executive Rob Bould forecast that growing demand for property outside London would see the yield gap narrow between offices in the capital and prime regional offices.
He said: “Demand for commercial property in London and in the UK regions remains extremely strong. The value of transactions has been steadily rising, reaching circa £57bn in the year to Q2, compared with £38bn in the corresponding period last year.
“Increasing investor interest in the market outside of London is also evident. With Greater London excluded, transaction levels are higher than their pre-crisis peak, and now account for 50% of the UK total, compared with less than a third two years ago.
“This growth will be supercharged by the devolution of fiscal and other powers to local authorities prompted by the recent Scottish referendum.
The prime equivalent yield for central London offices is 4.2% compared with 6.7% for prime regional offices, but the yield gap is narrowing, he added.
Focusing on the regional market, Bould pointed out that there are office markets where there has been little development for six years.
However, he said that some of these markets are seeing a clear tipping point whereby the development pipeline is on the verge of being surpassed by demand levels.
He identified the town of Leeds where the supply shortage is so acute that there is only one year’s supply left.
Bould added that the secondary market “is experiencing similar conditions to the early 2000s” and non-prime returns in the next few years should be better than prime in every sector.
Bould concluded: “Non-prime yields are starting from a high level, investment demand is recovering, credit conditions are easing and we expect solid GDP growth of around 3% this year and 2.6% next year. Non-prime returns in the next few years should be better than prime in every sector.”
The comments came ahead of a joint presentation with the British Property Federation at EXPO to present the case for the UK as one of Europe’s leading lights for investment opportunities in 2015.
