FTSE 350: Good property investment opportunities still exist outside London

Development in these areas was conspicuous by its absence in the wake of the financial crash, and there is now a scarcity of quality office space as well as logistics space to accommodate growing demand for warehouse distribution centres. That’s good news for the likes of St Modwen Properties (SMP), which recently secured a new £475m unsecured revolving credit facility.

The company also looks set to benefit further from a strategic review that resulted in the sale of its stake in the New Covent Garden Market site in Nine Elms Square. There remains a significant development pipeline, which helps to explain the discount in the share price to forecast net asset value (NAV). On the other hand, there is a growing housebuilding arm, where brownfield sites are brought through the planning process and sold on to developers, although more recently it has built on the land itself. 

Grainger (GRI) is also involved in the residential market, but as the UK’s largest quoted landlord. More recently, it's transformed its business model away from a regulated-tenancy property portfolio and into the private rented sector. In what seems like no time at all, its investment pipeline has nearly doubled to over £650m, with another £600m in the planning stage or under consideration. And demand for rented property means that rents are likely to rise faster than the average market rate. Meanwhile, regulated tenancies continue to provide decent cash flow, as they are sold when becoming vacant.

Investors in the real estate sector are likely to become a little more discerning, but the attractions are still there because despite the increase in the Bank of England base rate, 10-year gilt yields are still around 1.2 per cent. Furthermore, with opportunities to invest for the next upcycle somewhat limited, companies may elect to reward shareholders with special dividend payments.