The investment market South West continues to show resilience, even in the face of changing economic conditions. Many had anticipated that the Bank of England’s gradual reduction in interest rates would inject renewed energy into the sector, but in reality yields have remained largely unchanged. Investors are still targeting the same rates of return as they did when interest rates were higher, underlining the stability of their expectations.
Limited supply, strong demand
While activity levels might not be booming, the lack of available property is ensuring that when opportunities do come to market, they attract healthy levels of interest. Investors remain selective, but competition is strong for quality assets.
Sector highlights
- Industrial and warehousing
Still the most sought-after sector, with strong buyer appetite. Prime modern stock is achieving yields in the 6.5% to 7.5% range. - Offices
Performance is more variable. Returns in South West market towns typically fall between 7.5% and 10%, with quality of building, lease terms and covenant strength playing a decisive role. - Retail
Demand is highly dependent on both location and asset management potential. Well-let properties can achieve yields similar to industrial (around 6.5% to 7%), while more secondary stock sits at 10% or higher. Converting upper parts to residential remains a popular strategy for investors seeking added value.
Investment Outlook for the South West
Property remains a sought-after asset class, but the lack of stock is holding back overall transaction volumes. Many landlords are choosing to hold onto their properties rather than sell, which is restricting supply.
Looking ahead, further reductions in the Bank of England’s base rate could begin to shift investor behaviour. If savings rates fall in line with the Bank rate, those currently benefiting from above-average returns on cash may start seeking alternatives. That could mean more buyers entering the investment market South West, intensifying competition for the limited opportunities available.
