LONDON—“The UK's attractiveness as a safe haven for international property investors continues unabated.” That is according to Nick Cook, principal and managing director of Avison Young's London UK office, who spoke last week at Avison Young's annual meeting.
He told the audience of more than 700 that “last quarter had an estimated £40bn trying to buy well-let commercial investments in Central London. Only £8bn was placed,” he added. And approximately 80% of the investors were international, he said, many from the Far East.
“Interest in investing in the UK has also been fuelled by rising rents—both offices and industrial—and in residential values particularly in London and the South East of the country,” he explained. “This is being driven by low supply rates. The total returns for the last year (June to June) were Offices (21.3%), Industrial (20.7%) and Retail (10.6%).”
Cook noted that prime investment yields for well let offices are around 4% and “for big sheds greater than 100,000 square feet.” Yields are nearer to 4.5% and prime retail investments are sub-4%, he added.
Growth in total occupancy costs in Central London has put the question of decentralisation back on the board room agenda, Cook explained. “The Thames Valley which includes Heathrow Airport and major centres like Bristol, Birmingham, Manchester and Leeds are the primary beneficiaries. HSBC, Sainsbury, Tesco, PepsiCo and many smaller businesses have already decentralised.”
And as competition for the best staff continues, “occupiers are increasingly looking at developing more sophisticated 'well-being' strategies as part of their HR and workplace strategies. Cost cutting of space costs has been substituted with optimising the workplace environment in the widest sense such that employees can be more productive whilst gaining an improved sense well-being,” he says.
Another developing trend changing the face here is urbanism, “with many wanting to move closer to the heart of the city and are now prepared to live in tower buildings.”
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