Landlords should target student housing and build-to-rent (BTR) if they want a secure investment with decent yields but consider shopping and leisure centres if they’re prepared to take a risk for the highest returns.

Excellion Capital has unpicked the latest yield data from Knight Frank - as well as data from Lendlord, Savills and the ONS - to reveal that the most secure investments with access to the cheapest financing rates are typically residential.

Student accommodation

Student accommodation provides the lowest yields, with the overall sector delivering an average of 4.3%, while BTR also delivers very stable yields, averaging 4.5%.

While the warehouse and industrial sector delivers an average yield of 5.28%, high street retail returns 7.83% and it’s 8.5% for the leisure sector.

The shopping centre sector delivers the highest yields at an average of 9.13%, while the HMO sector in England and Wales also brings one of the highest average yields of 9.7%.

Robert Sadler, of Excellion Capital, said lenders are most concerned with the long-term value of an asset rather than the income it generates, meaning that 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. 

“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,” Sadler added.

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

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