Landlord News

UK prime yields continue to fall

Em Morley - March 29, 2017

The average prime UK yields fell to 4.79% in February, with Britain now in its longest consecutive period of decreasing yields for three years.

Looking at activity levels for the first three months of the year, investment volumes are on course to break £9.8bn. This is partly to do with the sale of a number of so-called trophy property assets throughout Britain, according to a new report from Savills.

Falls

The latest Market in Minutes report from the firm indicates that yields in the city office market fell to 4% in February, as a result of declining supply and sustained demand.

Mark Ridley, CEO of Savills UK and Europe, noted: ‘We are currently seeing steady investment volumes across all markets, but one of the biggest barriers to liquidity is the lack of investment stock currently being considered for sale.’[1]

‘With very little speculative development in the office or logistics sector and continued occupational demand, pre-let fundings or refurbishment opportunities will push investment volumes forward,’ he continued.[1]

UK prime yields continue to fall

UK prime yields continue to fall

Overseas

In addition, yields are sliding in the South East and regional office markets, currently 5.25%. This is thanks to greater activity by overseas investors, who made up 29% of the total regional investment volume in 2016. This was the highest level since 2012.

Kevin Mofid, director in the commercial research team at Savills, commented: ‘Overseas investors have been increasingly active in the UK’s regional markets, with European buyers, particularly those from Germany, being especially busy.’[1]

‘Investors are set to continue to focus on the regions for the foreseeable future as total returns in some regional office markets are predicted to outperform many central London sub-markets over the next three to four years,’ Mofid added.[1]

[1] https://www.propertyinvestortoday.co.uk/breaking-news/2017/3/uk-prime-yields-continue-to-sharpen