London still top for real estate investors

London is still the best market for real estate investors, says Experian.

Each quarter Experian converts the historic and future performance of over 220 property markets in the UK into a league table of investment performance.

Among the stronger performers within the eastern region were the Norwich office market and the Cambridge industrial market.

These two locations moved up 12 and seven places in the rankings over the last three months.

But it says the continued dominance of Londons real estate markets is as striking as it is predictable.

Eight of the top 10 ranked markets are in London, and most in the office sector.

Simon Marx, head of real estate forecasting and analysis at Experian, says: Norwich is seeing renewed pressure on office rents after a largely negative period, due to a lack of good quality space.

Industrials in Cambridge should see the benefits of inward investment and regeneration over the next few years, particularly around transport links. Its biotech offer is of international quality.

The perceived higher risk in the current overheated market, coupled with the influx of risk-averse foreign investors keen to secure trophy assets has fuelled this market.

“Investment into London offices has reached record levels in each of the last three years. Yields are below 4% and still investors are not put off.

Despite this, Experian is forecasting a slowdown in the strong returns of recent years.

Marx adds: If we look at the next five years in isolation, returns in London offices will average 8.5%, compared with 9.3% over the last five years.

Investors will focus on adding value, by paying more attention to the quality of tenant.

“Achieving rental growth and stronger income returns are increasingly important to the short and medium-term investor.

Other markets to watch include Bristol and Peterborough offices, which climbed 70 and 58 places respectively in Experians rankings over the last three months.

Knightsbridge & Chelsea and Harrogate retail also improved by a similar magnitude.