The strong performance of commercial property in central London means that, when the UK's real estate sector is looked at as a whole, it appears to be strong. However, data published recently by CBRE highlighted the difference between the figures when the capital is not taken into account. According to its research, quarterly total returns for office properties between April and June stood at 0.9 per cent for the UK. When central London and the south-east are removed from the equation, this falls dramatically to -0.8 per cent.
Senior economist at the Royal Institution of Chartered Surveyors (Rics) Josh Miller stated that, while the gap between London and the country's regions is large, it is not growing. "I would say that the gap is more or less constant - I wouldn't say that there have been many significant changes over the last quarter. That said, there is a big gap that has existed for some time," he commented. Mr Miller added it is not only geographically where there is a divide in the UK's commercial real estate sector, but also in terms of the quality of the assets available.
He pointed out conditions at the prime end of the market in locations such as Manchester or Leeds will be very different to the secondary and tertiary sectors, with a lack of good-quality office space fuelling demand for the best properties, while those considered to be of a lower standard are likely to be avoided by occupiers. In its Regional Office Market Review for the first half of 2012, CBRE asserted that "the pattern of activity on a city-by-city basis has been more varied than at any point in the recent past". The organisation highlighted Aberdeen, Edinburgh and Leeds as locations where deals for larger premises have boosted take-up levels and put the office markets in a strong position.
However, other cities in the UK's regions are not faring so well, with Bristol and Birmingham singled out as two places where take-up levels are well below the long-term average. CBRE also noted demand from tenants in many regional markets is increasing, as they are becoming aware of the lack of available grade A space, as well as the low level of developments in the pipeline. From an investment perspective, the focus is very much on prime commercial assets, the firm stated, although properties with good refurbishment prospects are also attracting attention.
- Wednesday 22 August 2012