The fact that the London commercial property market is outperforming the provincial market will come as no surprise to anyone. As in other economic spheres this polarity has been evident for many years. Even during the depths of the recession London appeared to be insulated from the chill that swept through the rest of the UK.
Now the extent of this dislocation has been revealed by research from property consultancy DTZ which shows that, last year, investment in the London market outstripped that of the rest of the UK combined. This is the first time that London has attracted the majority of investment, highlighting the two-tier market that now exists.
This polarisation has been growing since the beginning of the financial crisis. While regional cities were experiencing high vacancy rates, oversupply and falling rents London was seen as a safe haven by investors. Over recent years this investment, particularly from overseas, has accelerated widening the gap even further.
During 2012, the figures from DTZ show, investment in London commercial property rose by 48 per cent. In contrast, investment in the rest of the UK fell by 18 per cent. In fiscal terms £16.1 billion was invested in the capital, compared with £15.9 billion spent in the rest of the UK.
Liz Peace, the chief executive of the British Property Federation (BPF), says these figures simply highlight what we have known for some time – and that it could be good news for other locations in the long-term.
“In itself this isn’t a bad thing and demonstrates the success of the city, and is likely to gradually lead to capital working its way out into other parts of the country as value and yields become harder to achieve in London,” she said.
Nigel Almond, head of research strategy at DTZ, says that he doesn’t expect to see London perform as well this year as many of last year’s buyers are unlikely to be selling anytime soon.
