Commercial property values in the U.K. increased for the third straight month in July with office buildings leading the way, according to Investment Property Databank (IPD).
The average value of shops, warehouses and offices increased by 0.2 per cent in comparison with the previous month. Total return, which combines changes in real estate values and rental income, was 0.8 percent.
The commercial property market is getting stronger, as lenders are becoming more willing to extend credit to borrowers. Mark Carney, the Bank of England governor, has said that its 0.5 per cent interest rate will stay at its current record-low levels and will not rise until the unemployment rate falls to 7 per cent.
Phil Tily, a managing director at IPD, said that Carney’s announcement on the Bank of England’s monetary policy should serve to encourage investors to invest in commercial real estate. Unless the country meets any of his stated targets, interest rates and bond yields are going to stay low. This is encouraging news for investors, who will be looking for “good value and income opportunities” in real estate.
Rental growth slowed down for office buildings in London. Retail properties in the city appreciated at a slower pace, according to IPD. Foreign buyers are now beginning to look outside London, as the economy improves.
Office building values increased at a rate of 0.5 per cent in July. IPD figures indicate that warehouses rose by 0.4 per cent. The average value of retail properties remained relatively unchanged. Income-producing commercial property prices had fallen for 17 consecutive months to March 2013.
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