40% yield loss recouped in prime commercial recovery

Demand in the office sector is coming from a broad range of investors including UK funds in regional markets and foreign buyers dominating in London (Bank of China’s purchase of One Lothbury, EC2 for £86million being the latest high profile example). Investors have been buoyed by a firming in sentiment among tenants in the UK’s main office markets as many look to take new space before rents rise again and incentives fall. An increase in take-up of office space is expected to continue through 2010, albeit at a steady rate.

Yields in the industrial market are now down to their lowest since August 2008 as bidding becomes increasingly aggressive. UK funds are dominating a market which is currently seeing a much anticipated improvement in the occupier market with the availability of grade A space falling. This in turn is increasing demand for secondary industrial assets.

The retail sector has been especially busy with strong demand and an increase in supply from investors ready to take advantage of better pricing where they can. Demand is focused on prime locations and properties as buyers look to safeguard themselves against occupational risks. Because of this turnover in the secondary market has been very limited. It’s a similar story in the retail warehouse market where strong demand and limited supply have pushed prices up and made potential buyers much more discerning.

David Erwin, CEO capital markets group, Cushman & Wakefield, said: "November saw a continuation of the rapid recovery in the prime market with a still notable imbalance of demand over supply. Equity continues to flood in from all quarters – our market knowledge suggests that there have been at least 100 individual buyers for the 114 deals seen in London’s West End market so far this year for example – and we are firmly in a sellers’ market. This will not suddenly disappear after Christmas – both the unallocated capital and the market view that property pricing remains relatively attractive – suggest the rally will push on into 2010."

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