Risk-Averse Investors Boost UK Property Market

The cautious approach to investment prevalent in Europe at present has helped support the UK's commercial property sector...

The cautious approach to investment prevalent in Europe at present has helped support the UK's commercial property sector. So says Ben Burston, associate director of forecasting and real estate strategy at DTZ, who explained investors' required returns have been driven lower by the reduction in yields in prime markets. Speaking during a webinar organised by DTZ, he explained this is one of the two main reasons behind the UK's stronger performance in comparison to other European nations. The second factor affecting the sector is "the decrease in yields in several UK markets", Mr Burston noted.

He added that, while the UK's property market is certainly not as strong as it once was, it compares favourably to other European destinations. "Yields are generally a little higher in the UK, and the UK also stands out as being outside the troubled eurozone. While the economy is struggling to generate the growth that would see a capital value uplift and increased strengths, the downside risks are lower," Mr Burston asserted. London in particular has become a target for international investors seeking a safe haven for their funds.

Earlier this week, chief executive of Great Portland Estates (GPE) Toby Courtauld highlighted the large level of investment that continues to pour into the capital's real estate sector. He said his company is confident its portfolio of office properties in the West End will perform well over the coming months, due to the lack of supply of Grade A space, the restricted development pipeline and strong demand from tenants for premises in this district of the city.

Mr Burston added investors are taking a more cautious approach to property investment, even in the capital, with a rising number of financiers unwilling to put money into assets that don't have "a super-prime 20-plus year lease". He attributed this to the uncertainty over the outcome of the eurozone crisis, as well as the generally worsening economic picture in the UK's regions.

- Friday 27 July 2012

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