Birmingham trumps London in PwC Property Investment Report

Posted on 16 January, 2015 by Kirsten Kennedy

With commercial property investors increasingly turning to the regional markets, Birmingham is attracting considerable interest. According to a new report by PwC, this will see the city overtake London as the most attractive location for property investment this year.

London has begun to fall out of favour with American and Asian funds due to the combination of the high price of commercial assets and a shortage of opportunities, the report states. In fact, this has seen the capital city slip from 5th to 10th place on the property advisor’s index for the most attractive investment destinations in Europe for 2015.

By contrast, Birmingham has climbed 14 places to claim the number 6 spot, with the major city centre regeneration spurred on by the upcoming HS2 project largely to thank for this. In addition, the lower cost of commercial property and wider availability of prime space has already begun to grab the attention of investors and as a result Birmingham is seeing a high level of interest from overseas property funds.

Chief executive of European operations at the Urban Land Institute (ULI), Lisette van Doorn, points out that this trend is not just exclusive to the UK – many “secondary” locations throughout Europe are benefiting from a resurgence in their commercial property markets.

She says; “Investors have found prime assets expensive and hard to source, and have in turn looked to find new opportunities in recovering secondary cities.

“Real estate investors – armed with capital from sovereign wealth funds and pension funds from Asia and North America – are moving into less competitive environments.”

On a wider scale, Berlin claimed the number one spot as Europe’s commercial investment hotspot in the report, with prices in the German capital lower than in neighbouring Munich. Dublin managed to retain its second place title from last year, raising hopes in Ireland that a significant economic recovery may be on the cards this year.

However, the big winner in the report was Madrid, which pushed Hamburg to fourth after climbing an impressive 19 places since the 2014 rankings were released. Due to the ongoing issues in the Eurozone, the Spanish capital is something of a risky proposition in terms of large investments, yet there are undoubtedly some excellent bargains to be found which could make very strong returns in the event of a market pickup.

In further bad news for London, investors are becoming increasingly concerned about the impact global trends could have upon property values in the city.

As one London based investor said; “The biggest threat to us is political instability, global trauma.

“London is relatively safe but if there is global disruption, yields in the City of London will be hit.”

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