Why London Garage Yields Look Low (And Why That's Not the Whole Story)

A typical inner London garage in a zone 2 postcode in 2026 sells for £45,000-90,000 and rents at £180-300/month. Run the numbers and you get a gross yield of 4.0-6.5% — well below the 8-12% achievable on a comparable garage in Manchester or Liverpool.

By the conventional yield-investor playbook, London is overpriced and the regions are where the real returns live. The yields say so. The yield-investor playbook is half right.

The case against London garages

If we stop at the income line, London looks bad.

A £55,000 garage in CR0 letting at £200/month grosses 4.4%. After insurance, repairs, and 7% voids, net is around 3.2%. Compare that to a £15,000 garage in a Liverpool L17 letting at £85/month — gross 6.8%, net 5.5%. Liverpool wins by a comfortable margin on income alone, with far less capital tied up.

For investors targeting clean monthly cash flow as the primary goal, the case for London garages largely fails. The maths is the maths.

The case for London garages

Now expand the lens to total return over a 10-year hold.

Capital growth is structurally higher. UK long-run residential capital growth is roughly 3-5%/year. London inner zones average 4-6%/year, with occasional decade-long stretches at 7%+. Garage sites in those zones tend to track the underlying land value, which is appreciating at the residential rate even when the garage itself is not.

Yield compression has further to run. In the regions, yield compression has been the dominant return driver of the past decade — a garage bought on 12% gross now resells at 8-9% gross, producing capital growth from the yield change alone. In London, yields are already compressed; the multiple is not going to halve again.

Redevelopment optionality. A garage on a 30sqm plot in central London is a residential development site in waiting. The gap between "garage on plot" value and "small studio on plot" value can be £200,000-400,000. Most garage sites will not realise that optionality, but a meaningful minority do, and the option value alone justifies a yield premium for the buyer.

Tenant stability. London garages let to professionals storing goods between moves, businesses storing stock, and city dwellers without basements. These tenants stay longer, pay reliably, and accept rent rises that regional tenants resist.

The 10-year total return

Run the same £55,000 of capital through two scenarios:

London scenario.

• £55,000 garage at 3.2% net cash yield.
• 10 years of net cash with 3% annual rent growth: £20,200.
• Capital growth at 5%/year: £34,200.
• Total return: £54,400. Annualised: 8.1% IRR-equivalent.

Regional scenario (£15,000 garage, scaled 3.7× to £55k of capital).

• £55,500 across 3-4 garages at 5.5% net cash yield.
• 10 years of net cash with 3% growth: £35,000.
• Capital growth at 3%/year: £19,200.
• Total return: £54,200. Annualised: 8.1% IRR-equivalent.

The total returns are within rounding distance. The composition is completely different — London is mostly capital growth, the regions are mostly cash flow.

Why this matters

The choice between London and the regions is not really a choice between high yield and low yield. It is a choice between two different return profiles.

London is for capital builders. Investors who do not need the cash now, want the lowest-friction tenant base, and are happy to wait for capital appreciation should be over-weighting London (and the home counties commuter belt). The 10-year total return is competitive; the 20-year total return is often superior because of compounding capital growth.

The regions are for income builders. Investors who want the rent in the bank now, are scaling toward retirement income, or who are using the rent to fund new acquisitions should be over-weighting the regions. Cash now, slower capital growth.

The mistake is to apply a single yield filter ("anything below 8% net is a no") across both markets. The London garages flunking that filter are the ones with the highest 10-year IRR for capital-growth-oriented investors. The regional garages passing that filter are the ones with the highest cash-yield IRR — but their 20-year capital story is materially weaker.

The Capital Growth Projection tool models both. Run a London garage at 5% growth and a regional garage at 3% growth, hold for 10 years, and see how the totals come out.

Capital growth rates are the most uncertain assumption in any property model. The figures above are illustrative; specific markets and specific years vary widely.