Newcastle has been named one of the Top 3 UK regional cities to invest in offices if you want to make good returns, according to new research from Knight Frank.
The UK’s regional cities are offering much better value than the majority of their European peers with strong fundamentals expected to lead to further rental growth, say commercial property specialists, Knight Frank.
In the top UK regional spot is Aberdeen – offering 6.50% yields, second is Sheffield with 6% and Newcastle comes in third offering investors an impressive 5.75% yield. These yields compare favourably against 19 European cities such as Zurich, where prime office yields are 2.50%, Berlin – 2.56% and Barcelona at 3.9%.
Only the Eastern European cities of Moscow, in Russia and Bucharest, in Romania, beat the UK regional cities for returns – with sky-high yields of 9.75% and 7.25%, respectively.
Dickon Wood, Partner in Knight Frank Newcastle’s Capital Markets team, comments: “Newcastle and other UK regional cities continue to offer great value in comparison to other European cities.
“Prime office yields in the top ten UK cities average at 5.275%, ranging from 4.75% in Birmingham, Bristol, Edinburgh and Manchester to 5.75% in Newcastle and 6.5% in Aberdeen.
“Comparisons are not straightforward but with Madrid at 3.6%, Milan at 3.4% and Brussels at 4.25%, the income return in the UK is attractive. Rental growth forecasts in the UK remain positive with limited supply and good take up. This undersupply of Grade A space will help fuel rental growth and future performance.”
Knight Frank compared prime office yields in major UK and European cities across the second quarter. The data also explored the property premium: prime office yields over 10-year government bond yields.
The top ten UK cities blended prime office yield is 5.275%. The 4.75% on offer in Birmingham, Bristol, Edinburgh and Manchester is 50 points higher than tier two European cities like Brussels and Prague; and 150 points higher than the financial hubs of Paris, Geneva and Frankfurt.
| UK Cities: Prime Office Yields (%) | Q2 2019 |
| Aberdeen | 6.50 |
| Sheffield | 6.00 |
| Newcastle | 5.75 |
| Cardiff | 5.25 |
| Glasgow | 5.25 |
| Leeds | 5.00 |
| Birmingham | 4.75 |
| Bristol | 4.75 |
| Edinburgh | 4.75 |
| Manchester | 4.75 |
| Prime Yield by European City (Net & Gross) | Q2 2019 |
| Moscow | 9.75 |
| Bucharest | 7.25 |
| Budapest | 5.50 |
| London City | 4.50 |
| Warsaw | 4.50 |
| Brussels | 4.25 |
| Prague | 4.25 |
| Dublin | 4.00 |
| Paris La Defense | 4.00 |
| Barcelona | 3.90 |
| London West End | 3.75 |
| Vienna | 3.75 |
| Madrid | 3.60 |
| Milan | 3.40 |
| Frankfurt | 3.00 |
| Geneva | 3.00 |
| Paris CBD | 3.00 |
| Munich | 2.80 |
| Amsterdam | 2.75 |
| Berlin | 2.56 |
| Zurich | 2.50 |
Knight Frank LLP is the leading independent global property consultancy. Its Newcastle office has a 76-strong team who provide property management, capital markets, office and industrial buildings agency, building consultancy, ratings and lease advisory and property valuations. The team is very proactive in the market, using its unrivalled access to the latest markets research to ‘know things first’. They are a friendly team, with personality, that deliver a personal service. ,
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