Brighton, Edinburgh and Cambridge lead office market performance in UK
Brighton, Edinburgh and Cambridge have the best performing office property markets in the UK as growth has slowed in some regions, a new analysis shows.
Overall some £1.3 billion has been invested so far this year to the middle of March but investment performance has varied across regional markets, according to the report from Savills, with specific office markets showing significant under/over performance depending on their position in the cycle.
Brighton, Cambridge and Edinburgh, with positive occupational markets, lack of development and limited choice for occupiers, have seen valuers applying higher rental value growth and increases in capital values, and therefore appear as high performers, the analysis found.
In comparison, markets such as Oxford, Nottingham and Glasgow have seen no or limited growth in capital values but their strengthening occupational markets have driven rental growth and Savills says that this will feed through to income return in the medium-term and have a positive impact on values.
‘Income return is largely driving the performance of the office investment market at the moment, although some cities are still seeing positive capital growth,’ said Mark Porter, director in Savills UK investment team.
‘Even those behind the curve at the moment are likely to see positive uplift in the next few months as the major regional cities are generally undersupplied with new office development, and are forecast to see continued employment, keeping them high on investors’ wish lists in 2019,’ he added.
According to Steve Lang, director in Savills commercial research team, the analysis shows how much a market’s position in the property cycle can impact short term returns. For example, some have been ‘hit’ with a short term structural shifts impacting from a weaker local occupational markets.
An example is Aberdeen, where oil price falls have led to lower valuations. But despite having been a lower performing office market in the current cycle, it is still a key city is expected to outperform as sentiment recovers.