Leeds tops the UK league as city office buildings yield big returns

LEEDS office buildings have the highest annual return on investment in the UK, according to a new study.

Office yields in the city saw the least movement in the last year and are the highest of all key cities, at 6.75 per cent.

The UK Key Cities – Office Trends report, by property consultants Drivers Jonas, said a number of large transactions were completed during the first half of 2009 as investors sought to take advantage of high yield returns.

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The total investment volume increased by four per cent year-on-year, underlying the city's popularity with investors.

Key investments over the last year included No 1 Whitehall Riverside, which was sold twice in nine months. Last month, it was sold by London and Stamford to NFU Mutual for 51.3m, representing a yield of 6.4 per cent.

However, the study forecasts that yields will harden throughout the year and stabilise at six per cent by the end of 2010.

The study, which also looked at London, Birmingham, Glasgow Manchester and Edinburgh, highlights that with no new developments due to complete in 2010, and sentiment improving towards the end of last year, some occupiers are now in a position to take advantage of the favourable lease terms being offered.

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According to Drivers Jonas, prime rents, which fell from 26 per sq ft to 25 in 2009, should remain flat in 2010, with demand expected to be driven by financial and professional service occupiers, along with the public sector.

Leeds City Council is currently looking for 250,000 sq ft of new space, of which 90,000 sq ft is required this year.

John Weir, partner at Drivers Jonas, said: "The study has shown that Leeds is standing up well in the continued downturn.

"Unlike other cities, Leeds will not be faced with a massive oversupply of office space which should help ensure a quicker return in values, when dormant unsatisfied requirements, particularly in the private sector, reignite."