UK commercial property performance holds firm

Published 11th Nov 2011

UK commercial property performance held firm in October, with total returns of 0.6%, matching September's figure, according to CBRE's latest Monthly Index.

Year-to-date total returns are 7.1%, with capital growth of 2% in the UK property market.

Central London offices continued to outperform the other UK market sub-sectors in October, although City office total returns slowed to 0.6% from 1% in September.

Performance in London's West End and Midtown were stronger than the previous month at 0.8% and 0.9% respectively.

Reflecting the weakness in other property sub-sectors, values fell for shopping centres, outer London/M25 offices and industrials.

David Wylie, head of UK economics and forecasting at CBRE, said: "The growth in property values over the past month continues to be relatively skewed towards central London offices, with strength there more than offsetting weakness elsewhere.

"With the UK market as a whole seeing virtually no movement in yields over the past six months, rental growth has provided the key difference. In the year-to-date, central London offices have seen values rise by 6.3%, which has been almost wholly supported by rental growth.

"By contrast, the slide in high street shop and shopping centre rental values has been a significant factor in holding back overall retail sector capital growth and returns."


October UK Monthly Index snapshot

• Office returns improved to 0.7% in October from 0.6% last month, with capital growth of 0.2%

• Central London offices saw the strongest sub-sector returns at 0.8%, with capital values up by 0.4% following rental growth of 0.8%.

• Shopping centres saw the weakest sub-sector returns at 0.2%, as a result of a 0.3% fall in values over the month.

• Retail warehouse and high street shop returns held up over the month, matching the 0.6% and 0.5% recorded in September.

• Outer London/M25 office values fell by 0.2%, pulled down by further rental declines.

• Rest of UK office total returns improved to 0.5% following a 0.1% increase in capital values.

• Industrial returns weakened to 0.5% this month, with values falling by 0.1%.

• Overall rental values were broadly flat over the month, increasing by 0.1%.

• Equivalent yields remained unchanged for a sixth consecutive month at 6.6%.

Source: ' Egi '

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