European commercial real estate investors are cautious about putting money into new ventures and their low tolerance for risk is resulting in a kind of tunnel vision where they are focusing only on the best properties in the best neighbourhoods. Investors are mainly looking at places what London and Paris have to offer without considering other options which will also be able to provide a good return on investment.
Investors can make good money on properties which are occupied by stable tenants which have committed to long-term leases. Commercial property yields in the UK are currently on the rise, due to a combination of low capital values and rising rents.
Few advisors are pitching regional properties to their clients, but this is an option which can make good sense. With the bond market offering very low rates and limited stock available in the blue-chip sector, it makes sense for investors to look a bit further afield for properties where they can invest their money.
For new investors, the idea of buying and selling property may seem like a daunting task and they would rather put their money into something like bonds, which offers the advantage of liquidity. For other investors, being able to see a brick and mortar location for their investment gives them some degree of security that is not present in a paper bond.
There are still deals to be found on properties located at the fringe of prime areas. When commercial tenants cannot find space in the heart of the business district, they will be forced to look further afield. Business owners will always be in the market for good quality space, even if they have to be a bit flexible about location.
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