The analysis from global property consultancy JLL looks at the economic and office market performance of 37 smaller towns and cities giving an insight in to which locations will offer the biggest opportunity over the next five years.

The report shows some smaller cities are found to have a stronger outlook than the major cities such as London, Manchester and Birmingham.

It explains that the success of these smaller cities will be closely associated with their ability to develop and grow clusters of businesses, along with strong university links and the provision of integrated transport and infrastructure.

Growth leaders, including Brighton, Solihull and Reading have seen capital value increases of over 25% since the end of 2012 and are expected to see a stronger than average economic performance over the next five years. 

With the outlook remaining solid for these cities, most of which have firmly established business clusters, JLL says it may be prudent for investors to focus on opportunities where they can reposition their assets to benefit from any price growth.

The report also reveals locations such as Oxford, Warrington, Southampton and Nottingham, with a similarly strong economic outlook but where recent capital value growth has not been as strong as the growth leaders and opportunities may actually be greater going forward.

These potential performers include a broad range of property markets that JLL anticipates could benefit from further capital growth as the property market continues to respond to the improving economic climate.

‘The outlook for the UK’s smaller cities is now more optimistic than it has been for some time. Our research shows potential performers, including the likes of Oxford and Warrington, should benefit from further capital growth over the coming years as the property market continues to improve,’ said Chris Ireland, chairman and lead director for UK Capital Markets at JLL.

‘Indeed, the potential for growth in some of the smaller cities may be greater than in the big six regional centres which have already seen substantial uplift,’ he added.

‘From an occupational perspective, we think there will be a gradual shift towards office rental growth in a number of these centres which should ensure continuing investor and developer interest,’ explained Ireland.

According to Ben Burston, head of UK offices research at JLL, strong business clusters are a key determinant of future growth prospects. ‘For instance, Oxford’s strong life science cluster is contributing to a robust employment growth outlook, while Warrington is benefitting from a strong nuclear research and technology cluster,’ he said.

‘The devolution agenda provides an opportunity for more decision making to be taken at local level, which could help drive improvements to transport, infrastructure and public realm that will help attract people and businesses, and thereby drive future growth,’ he pointed out.

Cities identified in the report as ‘awaiting lift off’ include Sheffield, Belfast and Newcastle. These cities are forecast to see slower than average economic growth. As a result, investors may need to focus on the best and most established locations within each city, and in some circumstances quality properties may be available at a discount relative to other centres.