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Commercial rental growth revived

Improved occupier sentiment is driving increasing rental value growth, particularly within the Central London office and retail market, according to the latest Commercial Property Market Outlook from Cluttons.

Although the wider UK regions continue to witness limited rental value growth, offices remain the strongest performing commercial sector, underpinned by intense demand and robust performance within Central London and the south east.

Sue Foxley, head of research, Cluttons, said: “The market is clearly benefiting from increased confidence, indicated by the diversification of international investors who continue to dominate the market. Increased competition and limited supply continue to drive an upturn in capital values within Central London, with trophy assets often transacting well ahead of asking price as a result.

“There are opportunities outside the capital, however. Investors have recognised that London’s market is highly competitive and that they must broaden their horizons as yields harden. There is sustained interest in well-located, high quality assets, particularly in key locations within the M25. The south eastern office market is anticipated to produce total returns of around 12 per cent this year, the highest levels recorded in nearly three years.”

As the economy returns to growth, well located and well let retail outside Central London is attracting renewed investor interest with keener prices being paid for the best stock.

In terms of the industrial market, well-let regional sheds offer good value potential, though supply remains restrictive.

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