Real-estate investment trust McKay Securities (MCKS) is taking full advantage of the revival in demand for office space in the south-east with the purchase of an 11-floor block in Brentford for £19.3m. The property, close to the M4 motorway and opposite the University of West London, is currently let to 17 tenants, generating a rental income of £1.02m, with additional revenue from advertising hoardings and a car park next door, taking the total to £1.57m.
This provides an initial yield of 7.7 per cent, with rents varying from £13.5 to £20 per sq ft. However, there is considerable scope for an uplift. Using a conservative reversionary yield of £20 per sq ft on a fully let basis would generate a yield of 11.8 per cent. An increase in rental values has already spread out from the West End of London to Hammersmith and Chiswick, but the rent differential between these areas and Brentford is now at a record high, and this gap is expected to close as more companies compete for limited space.
