The Leeds City Region Deal, combined with improving office rents, could act as a tipping point to persuade property investors to view Leeds as an appealing location for investment, according to Morton Fraser.
New research* amongst British property investors by the law firm’s commercial real estate division ranks a list of ten British cities according to their attractiveness as investment options.
Edinburgh (+24), Bristol (+21) and Manchester (+4) are the most appealing destinations for investors – more found them attractive propositions than those who did not.
However, Leeds did not appeal to the majority of investors, with more rating them an unattractive investment proposition rather than an appealing one.
According to commercial property experts at Morton Fraser, occupier demand coupled with a strong development pipeline could allow prime office rents to reach new levels, helping to attract property investors. Some 31 per cent of investors polled felt Leeds was already an attractive location.
David Stewart, commercial real estate partner at Morton Fraser, said: “Edinburgh, Bristol and Manchester have all demonstrated real economic resilience since the recession.
” Leeds can follow suit if investors can see the prospect for rental growth. The rental gap in Leeds has already narrowed between quality refurbished space and new build prime offices, and with a number of occupiers already committing to large pre-lets, it will be interesting to see whether local developers have the confidence in their product to push rents beyond the current ceiling.
“Demand for equity stakes in commercial property vehicles has increased in recent years as investors seek value and flexibility in the asset class. The prospect of rental growth will play a key role in ensuring investors see regional locations as positive income-generating opportunities.
“Regional commercial property investment has a lower upfront capital cost but can often return higher yields and longer tenant leases, improving income security. However, those benefits are outweighed by perceived economic risks in most regional cities by potential investors.
“That said, experience shows that a good property investment can withstand economic fluctuations and the right opportunities can be found in all these locations.”