According to research conducted by DTZ, the regional retail and industrial markets offer the best opportunities for commercial property investors – with Manchester topping the rankings.
The firm’s European Fair Value Index Q2 2015 report reveals that due to strong investment activity in the UK, yields have been pushed down further in 12 out of 32 markets. The UK property index fell by nine basis points, from Q1’s 58 to Q2’s 47.
Yet, despite UK commercial property investment opportunities falling, the regional industrial and retail markets remain highly attractive.
According to the report, Manchester retail offers investors the most attractive opportunities due to good rental growth prospects, which are expected to push capital values up by 3 per cent per annum over the next five years.
Commenting on Manchester’s ranking Bruce Pozier, Senior Director for DTZ in the city commented: “In general there’s a buzz about Manchester at the moment, supported by government regional policies and the development agenda, and we’re seeing strong interest in property from both domestic and foreign investors.”
He added that medium term growth prospects are good, and the anticipated rise in population, together with businesses relocating to Manchester, will fuel demand for retail space which bodes well for commercial property investors.
Elsewhere, the Newcastle and Glasgow industrial markets and the retail markets in Leeds and Bristol make up the top five underpriced markets in the UK.
Global Head of Forecasting at DTZ, Fergus Hicks, said: “Strong investor demand is continuing to fuel investment activity in UK commercial property and yields are falling as a result.
“While the most attractive opportunities for investors at the moment are in regional retail and industrial markets, we do expect more markets to look fully priced going forward and investors should move now to secure the best opportunities.”
Head of UK Research Ben Clarke added that, while the regional markets offer good opportunities in the present circumstances, interest rate rises expected by the turn of the year will lead to commercial property pricing looking less attractive and the number of opportunities diminishing.