Boost for Regional Markets as Investors look further up the Risk Curve

Posted on 10 April, 2015 by Cliff Goodwin

The UK regions are becoming an increasingly attractive target for foreign investors. Driven by a surge in North American, Chinese and European money, regional investment last year reached an all-time high, claims DTZ’s latest property outlook.

Boost-for-Regional-Markets-as-Investors-look-further-up-the-Risk-Curve

According to the global service provider’s European Transaction Based Price Index, British regional investment rose eight per cent during 2014, up from 28 per cent the year before. Outside London a record £36bn was ploughed into commercial property investment.

“Prices outside of London in the UK only began to show clear signs of recovery at the beginning of 2014, having fallen by close to 50 per cent from their 2007 peak,” explained Nigel Almond, head of DTZ’s capital markets research. “As a result prices are still 25 per cent below their peak and back at 2004 levels.”

He said that growth in central London remained robust at 23 per cent year-on-year, but cautioned: “That rate of increase is beginning to cool. On a quarterly basis prices in London rose by just five per cent in the fourth quarter, compared to eight per cent for the previous three months … This cooling comes as no surprise as prices in London are now 20 per cent above their previous peak in 2007.”

The index also highlighted Scotland as a key hotspot for foreign investors. “There are many reasons to be positive about the outlook for the Scottish commercial property investment market in 2015, on the back of transaction levels of more than £2.85bn last year,” added Stuart Spalding, DTZ’s investment director in Glasgow.

“Overall, investors are likely to begin looking further up the risk curve, and the yield gap between primary and secondary assets will continue to narrow.”

In a separate statement DTZ claimed that many “perceived risks” to the UK property market — including the impact of next month’s general election and volatility in energy prices — were being overplayed, with “any possible Euro-referendum likely to be several years away”.




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