London’s Midtown has outperformed the City and West End markets over the past three years, according to new research.
The Farebrother and IPD Midtown investment report, published today, said the area had delivered better income returns for investors in rent years after landing a succession of City and West End relocations.
Midtown has also made the greatest recovery in rental values, rising higher than City and West End to within 15% of their peak in June 2007.
Farebrother and IPD believe rental growth has become the main attraction of the market for investors.
In 2011, occupier take-up grew by 17%, to 2.2m sq ft with relocations to Midtown by Google, NBCUniversal, John Laing and Tate & Lyle.
Investors have followed, injecting nearly twice as much money – £2.33bn – in 2011 as they did in the previous year.
Alastair Hilton, head of investment at Farebrother, said: “Midtown’s strong take-up, low supply, active demand and restricted development pipeline make a compelling case. We anticipate prime yields to be maintained in 2012.
“The secondary sector will remain more volatile on account of its higher risk profile. This sector still faces considerable challenges in raising finance.”
Land Securities investment management director Tom Elliott said the company had witnessed a significant improvement in the quality of real estate in recent years.
“New Street Square has contributed to putting this part of the capital on the map for London’s businesses and helped push Midtown rents towards those found in the City,” he said.
“It is now seen as a well-established office occupier location and the arrival of Crossrail will only add to its profile and draw.”
IPD senior research manager Greg Mansell said the area’s range of lot sizes made it attractive to both domestic and foreign investors.
jack.sidders@estatesgazette.com
