Regeneration properties performed almost twice as badly as the overall property market last year.
Returns from regeneration properties were -6% in 2007, compared with the -3.4% returned by all property, according to Investment Property Databank’s Regeneration Index.
IPD said the sector was still ‘a solid option for investors looking for long-term returns, but proved more vulnerable to the recent market downturns’.
Offices in regeneration areas returned -0.9%, compared to -0.5%, in the overall office sector. In the retail sector, retail warehouses and shopping centres in regeneration areas underperformed the retail warehouse and shopping centre UK averages, returning -7.5% and -4.7% respectively. Industrial property returned -4.4% compared with a -3.5% UK average.
For the first time the index measured development performance in regeneration areas. Developments in regeneration areas returned 1.2% in 2007, significantly outperforming the IPD UK All Property Index.
Over the medium and longer term, total returns from regeneration areas are identical to the broader UK. In fact, the last 27 years have shown average annual total returns of 11% in both cases.
The last 10 years show 11.4% total returns on the IPD All Property Index and 11.3% on the Regeneration Index.
Five year returns are 12.2% respectively and it is only in the last three years that regeneration properties have under-performed at 8.8%, compared to 10.8% for All Property.