CB Richard Ellis’ UK Monthly Index for May has been published and, overall, it shows good news for the UK commercial property market, with London’s office sector leading the way.
Positive capital growth was recorded at 0.2%, delivering total returns of 0.7%, up from 0.6% in April. The Central London offices sub-sector registered a 0.6% increase, to 1.0%, making it the top performing sub-sector of the month. This is in contrast to commercial property markets outside London, which saw a fall of 0.5%. In the City, total growth of 5.6% has been recorded since the turn of the year, making it an overall 42.4% climb since the low of mid-2009. Across the UK, the offices sector produced returns of 0.8%.
All property rental values fell by 0.1%, with only London’s West End and City markets recording rises. In retail, shopping centres performed well, delivering total returns of 0.8%, reversing April’s 0.3% capital value decline.
Industrial returns were stagnant, with no capital growth leading to returns of 0.5%, down 0.1% on last month.
Analysts at the commercial property and real estate services adviser explained that, for investors, the appeal of Central London offices is varied. There is the income security afforded by occupiers and there is also a significant uplift in rents, which they say is down to ‘a combination of increasing demand for space and a restricted supply following the downturn’.
CBRE’s report comes with a note of caution for the retail sector. While values have continued to rise by up to 1.5%, consumers are expected to remain careful with finances amid a climate of government cutbacks and salary reductions, according to one senior analyst. Regional divergence will mean centres away from prime commercial property locations may suffer a drop in demand, he added.
