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We have already seen property investment yields fall in non-core markets, a year ago we were seeing prime yields outside the core at around 5% those yields have come in by 25-50 basis points to 4.5-4.75%. There are two factors that have contributed towards these movements of yields.
The first is scarcity of stock and a lack of product to actually invest in. The second is increasing confidence in demand and the increasing confidence particularly where we are going to see a take up of office space outside the core. Mayfair office rents at around £100 per square foot are considered by many to be expensive whereas non-core locations are more attractive in the areas between £70-90 per square foot.
Recently there has been enormous demand north of Oxford Street with some large letting achieved and these are the sort of locations whereby investors feel very comfortable because your pitching to a tenant audience who are very comfortable paying rents in those sorts of spectrums.
As the occupational markets improve as we see increased demand by occupiers and tenants for office space in London, therefore investors feel more confident that they can create the product for the increasing tenant base. Developers and investors looking for opportunities of a shorter term nature where they can refurbish and reposition then re-let buildings too an increasingly active tenant base, whereas in less confident markets those types of deals are attractive, but very difficult to finance. What we are seeing now is an increased appetite for investors for these types of opportunities whereby they can create the physical stock and let those buildings to an increasingly confident occupier base.
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.