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East Midlands Chamber News

Covid-19 and Brexit to trigger real estate ‘return on investment’ shift in East Midlands

New research indicates the pandemic and Brexit could act as catalysts for a shift in commercial property returns on investment in favour of the East Midlands.

In an RSM survey of more than 300 senior real estate experts across the UK in which respondents were asked to rate their top three regions, 70% believe the region will achieve the greatest commercial yields in the next five years.

This places the East Midlands among the top regions expected to generate the highest yields.

London (86%) maintained its position as the region set to see the greatest returns, the West Midlands (85%) came close behind, and the North West (79%) also rated highly in people’s minds.

Residential property trend predictions

Residential property was viewed differently, with neither the West or East Midlands featuring among the top three.

Some 86% believe the South West is the region set to see the greatest returns, followed by the South East (82%) and Yorkshire (74%).

The survey also showed that 61% of those based within the East Midlands believe changing working practices will be the largest influence on increased investment over the next five years.

The research goes on to illustrate that typical office-based roles will likely become more “remote-working” in nature, and less London and southern-centric.

Almost two-thirds (65%) believe planning reform will make a difference locally when it comes to Government policy for the sector.

Both HS2 (35%) and the Norther Powerhouse (35%) agenda carried the same belief, with over a third believing both schemes will have a similar impact.

Investment priorities

Nationally, it seems data centres will upset the traditional order of asset classes over the coming year.

While nearly 70% of all industry experts surveyed see industrial property as the main beneficiary of investment in the next 12 months, data centres accounted for the second highest level of expected investment (56%), usurping residential property as the third most favoured asset (44%).

The private rented sector featured as the fourth most likely asset to see a boost in investment (41%).

Kelly Boorman, partner and head of real estate in the East Midlands at RSM, said: “The global pandemic and Brexit have combined to present economic and geopolitical conditions and prospects that will change the real estate sector for good.

“Our survey supports the notion that both events could be acting as a catalyst for disrupting the traditional order of asset classes as seen with the rise of data centres – rebalancing where in the UK we will see the greatest returns on investment, particularly within the commercial sector in the East Midlands.

“The survey showcases our region is ready to reap the rewards of real estate investment, unlocking value that will only go onto stimulate economic growth for those who live, work and visit the East Midlands.”