Pricey London Property Looking Better Value

London is still by far Europe's priciest business location, but the cost of buying an office, as opposed to leasing one, is now greater in Madrid, Paris, Dublin, Munich, Barcelona, and Stockholm, according to a report issued on Wednesday.

According to real estate services firm Knight Frank, rental yields -- a valuation measure which moves inversely to price and is key for property investors -- have leapt by a full percentage point in London in the last six months as global credit conditions have tightened.

However, commercial property yields have been more static elsewhere in the region.

As a result, the prime office yield for Europe's premier financial hub was at 5 percent, but as low as 4 percent in other European cities.

And yet, London was still the most expensive European city to rent not just prime office space but also well-located distribution warehouse and retail space.

"The yield correction already seen in the UK has yet to be fully evidenced in the other major European centers," said Joe Simpson, Knight Frank's head of international research.

The fact that has happened without denting London's position at the top of the European rental league was a strong argument in favor of London as an investment destination, he said.

Prime office rents in London's West End stood at 1,607 euros ($2,486) per square meter per year, while prime distribution warehouse rents around London's Heathrow Airport were 212 euros/square meter and retail space in the UK capital's shopping malls was available at 6,427 euros/square meter, Knight Frank said.

Europe's next highest office rents were 1,358 euros per square meter in Moscow's central business district, where a building boom has so far failed to improve availability due to strong demand and where prime yields of 8 percent were still the norm.

Dublin was second in the case of industrial warehouse and retail space but still around 30 percent cheaper than in London.