Investment performance within urban regeneration locations

Author： Adair Alastair Berry Jim McGreal Stanley Poon Joanna Hutchison Norman Watkins Craig Gibb Kenneth

ISSN： 1463-578X

Source： Journal of Property Investment and Finance, Vol.23, Iss.1, 2005-01, pp. : 7-21

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Abstract

Purpose - Property performance indices have invariably focused upon prime markets with a variety of approaches used to measure investment returns. However, there is relatively little knowledge regarding the investment performance of property in regeneration areas. Indeed, there is a perception that such locations carry increased risk and that the returns achieved may not be sufficient to offset the added risk. The main objective of this paper, therefore, is to construct regeneration property performance indicators consistent with the CBRE rent index and average yield monitor. Design/methodology/approach - Local market experts were asked to estimate rents and yields for hypothetical standardised offerings for a range of regeneration locations throughout the UK, covering the period 1995 to 2002. Findings - The results show that rental growth was similar in regeneration locations compared to the prime market. However, the analysis highlights a major yield shift for property in regeneration areas in the short to medium term. The downward pressure in yields would suggest that once a regeneration area becomes established and rental growth emerges, investor interest is stimulated resulting in increased competition and a shortening of yields. Originality/value - The significance of this research is the quantification of property investment performance from regeneration areas that previously has not been available to investment institutions and decision makers. From a policy perspective this analysis is of relevance in confirming the maturing of locations that have received high levels of public sector support and indicating the effectiveness of regeneration policy mechanisms in creating sustainable urban environments capable of meeting private sector investment goals.