Investors chasing higher rental yields in riskier markets

Property investors to 'take more chances'
By Jenny Davey

JONES LANG LASALLE, the global property consultant, said yesterday that property investors are poised to gamble on riskier ventures to deliver higher returns, amid the biggest scramble for commercial real estate in history.

The company said investors were looking at risky speculative development projects and were also buying buildings in less desirable locations. The move comes as record demand for commercial property has pushed up property values, squeezing rental yields.

Tony Horrell, chief executive of European capital markets at Jones Lang LaSalle, said investors were increasingly looking at eastern European cities such as Prague and Warsaw, where prime office rentail yields were typically about 7.5 or 7.75 per cent, compared with less than 6 per cent in Western Europe.

Mr Horrell played down the risks, saying that most activity surrounded buildings let to international blue-chip firms.

Jones Lang said that most commercial property remains in the hands of corporate owner occupiers, reducing the value of properties available to buy from €4,700 billion (£3,200 billion) to about €1,500 billion.

Nigel Roberts, head of European research at Jones Lang, said that the gap between demand and the limited amount of commercial property available was a key factor behind rising property investment prices at a time when underlying demand for rent property from business occupiers is weak.

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