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Reports from the most recent of the UK Annual Residential Index, which are published by the global real estate consultancy group IPD, have shown that commercial residential investment continues to run ahead of inflation.
The reports from this index have demonstrated that portfolios from the private rented sector were at 8.9%, very much outdoing the per cent return from commercial property; offices, as well as retail property, shops and industrial units, which all saw an average of only a 2.7% return. The UK as a whole, however, saw 3.1% inflation last year.
This index, which was launched in 2001, is helpful in understanding where good investment may lie, gathering data and figures from investors with regards to the value of their commercially let properties and their managed residential assets, as well as the income that is generated from them. The index allows owners, agents, and potential investors the opportunity to analyse the market as well as compare market performance and where particular opportunities may be.
From this index, results demonstrate that performance is driven by the London market, and that returns are more from offices in central London at 10.1% than outer London – within zones 4–6, where the returns are 9.0%. Inner London – within zones 1-3 – showed the highest returns and were the best performing: they indicated returns of 10.7%, supporting the speculation that the markets around the Northern City fringes were leading the way: areas such as Old Street and its vicinity, and Shoreditch.
Christina Weguelin, surveyor at Morgan Pryce, says, “Inner London has become very attractive for institutional investors, and the extremely resilient commercial rental growth in inner London has avoided any further income yield compression, despite the rise in prices during the past year. We have seen the demand for space in inner London superseding the demand for offices in central London.”
Morgan Pryce is 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.