Solent: Investors looking beyond London to smaller cities, says JLL

Investors are looking beyond London and the ‘Big Six’ to the office markets of smaller towns and cities such as Portsmouth, Southampton and Bournemouth for investment opportunities, according to a new report by leading property consultancy JLL.

JLL’s ‘Where Next in the UK?’ report showed that the outlook for the UK’s smaller cities has been more optimistic than it has been for some time. Rising capital values and strong competition are now driving investors to look beyond the major UK cities for quality office stock and potential value.

The report looked at three categories of smaller city: ‘growth leaders’, ‘potential performers’ and cities ‘awaiting lift off’.

Portsmouth was named a ‘growth leader’ in the report, alongside cities such as Brighton, Swindon and Reading, meaning it has seen strong capital value growth, above 25% since the end of the downturn at the end of 2012, and is forecast to see above average economic growth over the next five years.

Southampton and Bournemouth were categorised as a ‘potential performers’ alongside Warrington, Nottingham and Oxford, meaning they have seen positive capital value growth, but below 25%, and are also forecast to see above average economic growth in the coming years.

Nella Pang, associate director in the Southampton office of JLL, said: “Southampton and Bournemouth have a strong economic outlook, without having experienced the same degree of capital value growth as ‘growth leaders’ such as Portsmouth.

“As such they should benefit from further capital growth in coming years as the property market gradually responds to the robust economic backdrop. The outlook for Portsmouth remains solid and we expect to see a gradual shift towards rent-driven performance.”

Cities ‘awaiting lift off’, including Sheffield, Belfast and Newcastle, have recorded recent positive capital growth, but are forecast to see slower than average economic growth.

Pang added: “With ongoing momentum behind the UK recovery and employment rising at its fastest pace since 1988, there has been a marked improvement in office market conditions across the country.

“As a result of yield compression and a scarcity of investable prime stock, investors are looking beyond London and the Big Six cities.”

The success of these smaller cities, says the report, will be closely associated with their ability to develop and grow clusters of businesses, along with strong university links and the provision of integrated transport and infrastructure.