What is Yield?
The Real Value of Space research frequently mentions “yield”. This blog explains the term in more detail, and specifically, how it is used within Sweett Group’s research.
In the property market, this term describes the ratio of rent to the overall value of a building. For example, if an office block is let at £10,000 per annum, and its market price is £200,000, then the capital value is 20 times (or 20 years purchase of the income).
The capitalisation rate / yield is therefore 1 / 20 i.e. 5%. This yield is known as an ‘all risks yield’ as it assumes factors such as rental increase, obsolescence, outgoings, etc. are implicitly included within the figure of 5%.
Yield within Real Value Research
The yield figure given within the Real Value of Space research applies directly to the additional space recovered from the building envelope with the premium insulation solution.
Take for example the Southampton case study. With the premium insulation solution a further 135.10 sq/m of useable space was gained, providing an additional rental income £24,878.00. The capitalised value of this additional space is £349,008.00 and when the figures are calculated as described above, this gives a yield of 7.13% (rounded to 7% within the research).
Share this blog post with your friends and colleagues by clicking on the social media icons below.