With UK commercial property values measuring stronger returns than ever, as well as riding high on the wave of the economic recovery, now is the time to invest? This week property expert Simon Morris asks which sector of the commercial property market makes a sound investment.
Simon Morris: Commercial Property Expert
Simon Morris is a London-based property expert who uses his knowledge of the industry, particularly it’s commercial, residential and industrial elements, to advise property investment funds on how to accrue profitable returns from the investment opportunities afforded by this growing UK sector.
As an expert who has spent years observing the trends of the UK market, Simon has noticed the fiercely upward trajectory of commercial property, which last month outperformed both stocks and bonds as an investment opportunity. This week Simon asks how you can capitalise on this success by focusing on a particular sector of this thriving market.
Retail Property: Opportunity in Key Areas
It is true that retail was the slowest subsector of commercial to recover from the recession, and rental growth is still somewhat weak, however there are opportunities to be found in key areas. Central London retail is strong right now, and in terms of rental growth, it’s set to exceed the national average over the coming year.
Office Property: Look beyond Prime Central London.
Whilst prime central London can still be a lucrative office space investment, prime yields only stand at 4%. Try casting your net further afield to Greater London, the South East and other urban hubs such as Edinburgh, which were revealed in the recent IPD monthly returns for offices, to be seeing strong improvements in terms of profitability for investors. It’s a growing market.
Industrial Property: Higher Income Returns
Industrial property may not experience the racy surges in capital values that are often enjoyed by prime office markets, but they should be a lynchpin of any well balanced property portfolio. That is because they deliver higher income returns. Notably, the IPD equivalent yield was 7.8% in March 2014. Furthermore, changing occupier requirements have facilitated a rising demand for industrial assets.
Explore the Alternatives
Simon Morris also suggests that you may want to explore the alternatives to diversify your portfolio and expose it to differing economic drivers. Mature alternative markets are experiencing more asset-management style stock coming forward, spurring opportunities in alternative sectors such as healthcare property and student accommodation.