Manchester retail among UK hot spots, says DTZ

Manchester retail is one of only three UK markets – along with London City offices and London West End retail – providing attractive opportunities for investors, according to research by DTZ.

DTZ's first Fair Value Index assessed 180 global markets according to constant criteria to measure attractiveness of market opportunities. DTZ said it spent two years working up the methodology for the index which will be updated quarterly and consists of 17 indices that will provide investors with a comprehensive assessment of relative value across the world's commercial property markets by region and property type.

The studied markets include nine UK cities but only Manchester in the North West. Overall, the first report showed the UK as fairly cold compared to the global average.

The report said: "Although the all-property score of 38 for Q2 2010 represents an improvement from 33 in Q1 2010, UK markets are not as attractive as they were this time last year, when they scored 55 in Q1 2009. The decline in appeal is a result of yield compression driven by investors who took advantage of the rapid re-pricing which occurred during 2009. This, coupled with a renewed focus on new supply coming on stream, means the outlook for the UK market is currently less alluring than last year."

Craig Barton, investment director at DTZ in Manchester, said: "The DTZ Fair Value Index is very encouraging for Manchester. While several UK regional markets remain unattractive to investors, we believe that the Manchester retail market will out-perform over the medium term, reflecting its strength as the leading retail market in the UK regions. We are seeing a stabilising of retail rental levels in 2010 in prime locations and would hope to see some sustained growth from 2011.

"Conversely, Manchester's office and industrial sectors are currently rated below fair value by the index, confirming that the rapid bounce back that followed the unprecedented declines in market values has now run its course and investors can no longer be assured of above average returns by simply 'buying the market'. That said, property is a very heterogeneous asset class and with proper stock picking it is perfectly possible to do hot investment deals in technically cold markets. This is very much the case for the office and industrial sectors in the north west, where we remain very positive about the prospects for good quality city centre offices, with a shortage of future supply, and multi let industrial estates. We are now entering a phase where detailed market intelligence will be the key to driving out premium returns for investors."

Ranking of key UK markets for Q2 2010

London City offices (HOT)

Manchester retail (HOT)

London West End retail (HOT)

London Heathrow industrial (WARM)

Glasgow retail (WARM)

London West End offices (WARM)

Edinburgh offices (WARM)

Glasgow offices (COLD)

Birmingham retail (COLD)

Manchester offices (COLD)

The report continued: "Despite general overpricing, a limited number of markets are still regarded as hot prospects, with London City offices and London West End retail markets standing out as offering attractive returns. Table 3 provides a list of the current Fair Value classification for the major UK markets."

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