New commercial property opportunities in London
Property investors looking to take advantage of rising rental yields could do worse than investigate commercial opportunities in London.
With rental yields on commercial premises in London currently standing at 7.8% and rising, investors looking to secure a slice of the UK capital’s property market are extending their search beyond residential homes.
Here, we explore three key sectors in the commercial property market to help you identify the investments that will deliver the highest yields, and ask London-based estate agents whether it is best to focus your search on central areas of the city or to look at property for sale in Fulham and other outlying districts.
Research shows that the first four months of 2015 were a time of deceleration for commercial property, following the heady capital growth seen in 2014. However, the market is bouncing back, according to West End estate agents.
Commercial office space
New research shows that offices saw the highest capital growth at 1.5% between April and May this year. This is down to London’s booming economy that is seeing start-up businesses relocate to new premises as they grow and take on more staff.
It is not just the West End of London where commercial office space is in demand. In the UK, a total of £23bn has been invested in commercial property in the first half of 2015, while areas of London, such as Shoreditch – which is establishing a name for itself as a tech hub – is experiencing unprecedented demand for office space because it is a source of creative staff.
And retail the lowest at 0.2% while the 12 month total return fell again to 17.6% and investment volume from January to May was £23.6 billion, up from £17.8 billion for the same period of 2014.
Despite increases in technology, such as the ability to establish a landline in South Africa, prices for industrial premises also held strong throughout the UK during the 12 months to June 2015.
However, the London commercial property market maintained a lead over other regional centres and made gains over its performance in the previous year. In the case of Fulham, this might be attributed to its easy access to good transport infrastructure, making the south, the south-west and the Midlands within easy reach both for suppliers and customers.
While commercial property rates for both office and industrial premises have seen a strong to steady increase, retail property is probably just holding its own.
Reflecting this slower rate of development the nationwide vacancy rates for retail premises are a relatively high 13%. But in parts of London, the vacancy rate for the past year has been as low as just 2.4% – suggesting that London continues to fuel and to push upwards, performance in the commercial property sector nationally.
Opportunities for investing in commercial property in London, therefore, appear to be especially strong. Leading growth areas are in office and industrial spaces, although shops and other retail developments are not far behind. Like residential property, the capital continues to lead the way when it comes to opportunities to invest in commercial property.
For more information on property values in south-west London, click here to discover more about values in multicultural Brixton and Battersea, which is experiencing unprecedented growth.