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Over a 20-year period the returns on investments in commercial property in deprived areas have exceeded the market ...
Over a 20-year period the returns on investments in commercial property in deprived areas have exceeded the market average, according to new research.

Between 1980 and 2001 total annual returns from property averaged 10.7% in the 20% most deprived wards compared to 10.2% in the rest of England.

During the same period, the research also reveals that investing in urban regeneration properties, such as shopping centres or offices, can be less risky, and often outperforms the market overall.

The findings are to be used to establish a new performance index for urban regeneration property returns, to help investors identify new opportunities.

Yvette Cooper, ODPM minister, welcomed the new studies at a presentation to institutional investors at the Tate Britain, London.

Ms Cooper said: 'A myth still exists that disadvantaged areas are no-go zones for investors. This research dispels that misconception once and for all. It shows that investment in deprived areas can generate a good return. Many deprived areas have very considerable economic potential that we need investors to tap into to help create the jobs and opportunities that communities need.'

Ms Cooper added: 'I believe that a new urban regeneration property index would be a valuable tool to enable investors to spot opportunities which previously may have been missed. I look forward to working with the property industry to make it happen.'

The first research project commissioned by English Partnerships and Morley Fund Management, which was carried out by Investment Property Databank, is based on the 20% most deprived wards as defined by the Indices of Deprivation 2000. The research measured the investment returns of commercial properties in those areas, compared to the national benchmark.

Findings from the research showed:

- Total investment returns from commercial properties located in the most deprived wards have outperformed those in more prosperous areas over the long term, at an all pro perty level and individually in each of the 3 property sectors (retail, office and industrial).

- Deprived wards have consistently had a lower level of risk (as measured by the volatility of returns) compared with more prosperous areas.

- There is no evidence that property markets in deprived areas are less 'liquid' than those in more prosperous locations.

Phil Clark, head of specialist funds, Morley Fund Management said: 'These studies are a major step in dispelling the myth that good returns from property investment can only be generated by investing in prosperous areas. This research shows there is a compelling business case to invest in deprived areas and regeneration projects.'

The second research project was funded by the Economic and Social Research Council, the ODPM and the RICS Foundation. It was carried out by a team from the Universities of Ulster, Aberdeen and Glasgow as part of the Property Economics and Finance Research Network (PEFRN).

This research focuses on key regeneration areas and analyses returns over both long-term and short-term time scales on urban regeneration properties held as investment assets using a total returns index and a beacon approach, both market tested methods.

The study was compiled from detailed data on commercial properties in major metropolitan areas across Britain over a 20-year time span. The areas covered include Greater Manchester, Tyne and Wear, Glasgow, Birmingham, Sheffield, Nottingham, Bristol and Cardiff.

Findings from the research show:

- The index shows that long run returns in regeneration areas have exceeded those across the market as a whole

- Annualised returns for all property and three property sectors (retail, office and industrial) all out-performed the IPD national index. In regeneration areas, retail property has out-performed both industrial and office property

- Regeneration areas appear to be particularly suited to shopping centres and retail warehousing investments, having benefited from restri ctions on out-of-town development.

- The general misconception that regeneration areas have significantly greater level of risk is misinformed; performance figures show that the level of risk faced in regeneration areas are not significantly different than in the market as a whole and in certain instances are lower.

Alastair Adair, head of school of the built environment, University of Ulster, added: 'These research studies provide the first quantifiable measure of investment returns in regeneration areas thereby providing the necessary market transparency to facilitate private sector investors and policy makers seeking to boost investment.'


Panel members taking part in today's presentation on both studies included Phil Clark, head of specialist funds; Morley Fund Management, Alastair Adair, head of school of the built environment; University of Ulster, Ian Womack, Morley Fund Management and board member of the Investment Property Forum and David Higgins, chief executive; English Partnerships

English Partnerships.

English Partnerships is the national regeneration agency supporting high quality sustainable growth across the country. It is a key delivery agency for the urban renaissance and the deputy prime minister's Sustainable Communities Plan. Working in close collaboration with public and private sector partners, its core strands of activity focus on:

- Building affordable homes and new communities

- Bringing new life to established communities

- Making best use of the nation's scarce supply of land

- Promoting skills, best practice and sustainability

Major initiatives include the National Coalfields Programme, Urban Regeneration Companies and Millennium Communities.

Morley Fund Management

Morley Fund Management ('Morley') is an independently managed, London based, asset management business with over £107bn* under management (as at 30.09.03). It actively manages a diverse range of asset classes and employs in the region of 900 staff world-wide based in London, Singapore and an associate office in Boston**

*Not including mortgage assets

** Morley Fund Management International Limited, an Aviva company

Investment Property Databank

Investment Property Databank Ltd (IPD) is an independent business headquartered in London with subsidiaries or associates in eight other countries. IPD is the international leader in measuring property performance and aims to expand the production of accurate and consistent information services to all major property markets. IPD collects full portfolio records from over 500 major investors across 14 countries ??? a databank capturing 39,000 properties with a market value of ???425bn (£256bn). The system is used to deliver benchmarking and portfolio analysis services to property investors and asset managers, and also to produce the industry-standard index of property performance for each country backed by detailed market analysis and research services.

RICS Foundation

The RICS Foundation is a charity established by the Royal Institution of Chartered Surveyors to examine and explore the key issues impacting on real estate and construction markets. Through focused research the RICS Foundation seeks to identify and highlight ways in which these markets can operate more efficiently and effectively for the economy, society and the environment.

Economic and Social Research Council(ESRC)

ESRC is the largest funding agency for research and postgraduate training relating to social and economic issues. It provides independent, high-quality, relevant research to business, the public sector and government. The ESRC invests more than £76m every year in social science and at any time is supporting some 2,000 researches in academic institutions and research policy institutes. It a lso funds postgraduate training within the social sciences to nurture the researchers of tomorrow. More at

University of Ulster

The University of Ulster has four campuses spread across Northern Ireland. The university's aim is to be an outstanding regional university with a national and international reputation for quality. The university makes a major contribution to the economic, social and cultural advancement of Northern Ireland as a region within a national and international context and plays a key role in attracting inward investment.

University of Glasgow

The aim of the university is to be a major research-led university operating in an international context with the following fundamental objectives:

- to provide education through the development of learning in a research environment

- to undertake fundamental, strategic and applied research

- to sustain and add value to Scottish culture,to the natural environment and to the national economy.

University of Aberdeen

The University of Aberdeen aims to create, develop, apply and transmit through the work of all its members knowledge, skills and understanding at the highest levels of excellence.

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