Robert Boag, manager of the UK Commercial Property Trust, has warned that even though rising rental prices in London should be celebrated, investors should consider that these trends will not last forever.
Speaking at an AIC conference, Mr Boag said that investors will always need to think long-term when it comes to commercial space in the capital city. It is this recent growth seen that needs to be balanced with what can be achieved in the long run. This is especially the case for rental yields fluctuating, according to Mr Boag.
According to the Financial Times, he said: “I am not forecasting that central London is going to drop like a stone, but you have to look at the components of that return, what is driving it. You have to be in and out of that cycle if you want to keep returns coming.”
Mr Boag went on to argue that investors are starting to shift their gaze away from central London, as outer areas tend to offer higher returns. He did however state that the market was still very difficult to read this early on in the year.
As property prices rise in the capital city, much of the commercial investment in the UK has been centred in the capital city, but this should not mean that all investors flock here. Marcus Phayre-Mudge, manager of the F&C TR Property investment trust, added that even though London has become a haven for the young and well-earning, gaining units in the city can be both very difficult and offer low profits.
Mr Phayre-Mudge added: “If you want to go out and start buying it now, it is extremely difficult. You almost have to already own it.”
For now, it seems that the capital city is bringing investment in, but whether these decisions are a good bet remains to be seen.