Findings from the latest Excellion Capital index reveal that student accommodation and build-to-rent (BTR) have emerged as the most sought-after property types for investment.

The research indicates that yields in both sectors have fallen below 5%, reflecting stable income streams and consistent asset values. Student accommodation posted an average yield of 4.3%, with prime London assets yielding 4% and prime regional properties at 4.25%.

BTR assets showed an average yield of 4.5%. Within this, prime BTR properties in Greater London were recorded at 4.25%, while single-family units and tier one regional city assets were both at 4.5%. Tier two regional cities saw higher yields, averaging 4.75%.

Other segments with similarly low yields included prime London co-living at 4.25%, Greater London warehouse and industrial assets at 4.75%, the London private rented sector at 4.76%, data centres at 5%, and prime regional co-living at 5%.

For investors seeking higher returns, the report identified opportunities in higher-risk sectors. Yields above 8% were noted in segments such as shopping centres and leisure.

Shopping centres achieved an average yield of 9.13%, with some local and neighbourhood centres reaching 10%. Sub-regional centres averaged 9%, while tertiary centres were reported to yield up to 20%, based on funding deals reviewed by Excellion Capital.

The leisure sector delivered an average yield of 8.5%. Within that, good secondary leisure parks yielded 9%, and prime leisure parks yielded 8%. High street retail assets averaged 7.83%, with good secondary high street retail delivering up to 10%.

In the co-living category, the broader House in Multiple Occupation (HMO) sector in England and Wales recorded an average yield of 9.7%.

Robert Sadler, vice president of real estate at Excellion Capital, commented on the need to assess yields with care: “For property investors, yields must be considered with real nuance.

“Low-yield assets are often considered as the most lender-friendly because they indicate a high asset value, steady and reliable income and, therefore, relatively low risk, however the lower the yield the lower the quantum of debt that can be supported by the asset.

“Lenders are most concerned with the long-term value of an asset rather than the income it generates, they’re going to be far more willing to lend at attractive rates — albeit lower leverage — for low-yield assets and be incredibly wary of the more unpredictable, erratic high-yield concerns of the market.”

He added: “It’s certainly a quirk of the real estate investment market that higher income relative to asset value is not always seen as a good thing.

“That being said, investors don’t have to reject high yield options entirely.

“A high yielding asset is technically riskier than a lower yielding asset – all other things being equal – but, as Warren Buffet says, risk comes from not knowing what you’re doing.”

Sadler also noted that experienced investors are able to navigate high-yield assets effectively: “We work with many highly astute investors who are experts at selecting high yield real estate with potential for significant value enhancement and yield compression.

“The advantage of a high yield asset, such as a shopping centre, is that there is usually significant income relative to the loan amount, meaning that there is plenty of surplus income to both service the loan and help fund business plan objectives, such as capex, tenant incentives and ongoing property management.

“Finance for these assets can be tricky but it is obtainable for well located properties managed by competent investors.”