Pandemic and Brexit to trigger real estate 'return on investment ' shift - RSM

The pandemic and Brexit could act as catalysts for a shift in commercial real estate returns on investment in favour of the West Midlands, according to research by RSM.

In a survey of more than 300 senior real estate experts across the UK, in which respondents were asked to rate their top three regions, 85 per cent believe the region will achieve the greatest commercial yields in the next five years.

This was just one per cent behind London (86 per cent) which maintains its position as the region set to see the greatest returns.

The North West (79 per cent) and East Midlands (70 per cent) also rated highly in people 's minds as regions set to benefit from higher returns of investment in commercial real estate.

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

The survey also, showed that 72 per cent of those based within the West 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 more likely become more 'remote-working ' in nature, and less London and southern-centric.

Over half (54 per cent) believe planning reform will make a difference locally when it comes to government policy for the sector, while under a third (27 per cent) believe HS2 will make a similar impact.

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

While nearly 70 per cent of all industry experts surveyed see industrial property as the main beneficiary of investment in the next 12 months, data centres featured as that which will see the second highest level of investment (56 per cent) usurping residential property as the third most favoured asset (44 per cent).

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

Elaine Shiels (pictured), partner and head of real estate in the West 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 West Midlands.

“The survey tells us that regional cities are an increasingly appealing prospect - and it is important that the West Midlands is ready to take advantage by ensuring the region is as open for investment as possible. ”