Familiarity and the Determination of Yields for Regional Office Property Investments in the UK

H<sc>enneberry</sc> J. and M<sc>ouzakis</sc> F. Familiarity and the determination of yields for regional office property investments in the UK, <italic>Regional Studies</italic>. This paper examines how effectively investment yields incorporate spatial variations in risks and returns into property prices. It is hypothesized that the pricing of property investments in non-core UK regions is affected by a pure familiarity heuristic adopted by investors based in London. Consequently, the determination of office yields is based not on the intrinsic investment characteristics of regional markets, but on a core market benchmark combined with a regional premium. This results in very long-term mispricing patterns with implications not just for the office property investment market, but also for the regions, especially those outside the core.