It has been argued that investors overlook investment opportunities in the real estate markets of the UK outside London. This paper examines the fundamentals of real estate markets in British provincial cities. It analyses the diversification potential for investing and differences in expected returns. It begins by presenting an analysis of the key economic drivers across provincial cities in comparison with London, the South East and the UK as a whole. This is followed by an analysis of total return and rental growth in individual cities. The paper then presents a correlation analysis of total returns and rental growth between the cities. This provides evidence of association between the patterns of returns and rental growth and indicates where there is statistically significant association between patterns of returns and rental growth across sectors and cities. Direction of causality is tested. The paper then proceeds to examine what investment patterns should be given market fundamentals compared to actual investment patterns and provides evidence of under or over investment.