UK opportunities still HOT in places – DTZ
London still offers attractive investment opportunities, with City office space and West End offices classed as HOT under DTZ’s Fair Value Index for the third quarter. These are the only two HOT UK office markets, according to the firm’s classification system. DTZ says the retail and industrial sectors continue to offer investors more attractive returns than offices, but points out that office markets improved markedly during Q3.
Overall, the number of attractive investment opportunities in the UK was higher in Q3 than in Q2, with most regional office markets registering as WARM compared with COLD in Q2. Yields in several regional office markets moved out during the third quarter – WARM markets now include Cardiff, Birmingham, Leeds and Manchester, which have all moved from COLD in Q2, as well as Nottingham, which remains WARM as in Q2.
Within London, the midtown offices location is also classed as WARM. As prices for City office space moved higher during Q3 this particular market has become slightly less HOT than in the previous quarter, while West End office space has become more attractive, moving to HOT as rental growth is expected to be strong as a result of forecast supply shortages amid recovering demand. “However, if expected yield compression continues into Q4, this market may only remain HOT in the short term,” DTZ notes.
Most retail and industrial markets are classed as WARM, including the Glasgow retail and industrial markets, Heathrow industrial, Birmingham industrial and London West End retail. The Manchester retail and industrial markets are both classified as HOT in Q3.
