Report identifies good returns on regeneration schemes in medium term

Property in regeneration areas remains a good investment option for the long term but has proved vulnerable in the short term, according to the latest benchmark index for the sector.

That was the headline from the results of this year’s Investment Property Databank (IPD) Regeneration Index, which showed that the Regeneration All Property Total return fell to -6.0 per cent in 2007, compared to UPD's broader All Property Index which slid to – 3.4 per cent over the same 12-month period.

Developments in regeneration areas returned 1.2 per cent in 2007, significantly outperforming the IPD UK All Property Index.

The figures indicated that over the medium and longer term, total returns from regeneration areas are identical to the broader UK as a whole. Over the last 27 years average annual returns of 11 per cent have been obtained.

The IPD Regeneration Index is sponsored by national regeneration agency English Partnerships (EP), developer Argent and the Morley Group of companies. It is supported by property services company Savills.

Steve Carr, director of policy and economics at EP, commented: "In this difficult market, it will pay to look carefully at property investment opportunities in regeneration areas. The Index clearly shows regeneration properties will eventually outperform when the cycle eventually moves upward. The long term prognosis for regeneration property remains good."

Yolande Barnes, research director at Savills, commented: "The case for investment in regeneration assets is more compelling if residential property and development activity are included. In fact, the more exciting returns and possibly the more stable income streams have been enjoyed  by those willing to diversify away from 'big box' commercial standing property investments and towards residential ‘small box’, ‘neighbourhood commercial’ type properties and development activity."

Argent’s Andre Gibbs stated: "We feel the Index has already gone a long way to demonstrating to institutional investors that property investments across some of the UK’s most deprived areas can show returns equal to investing in core locations."

Read the English Partnerships press release

Roger Milne

14 August 2008