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Commercial property market delivers ‘respectable performance’

As has been the case throughout the past year, December’s performance was very varied across the different market sub-sectors. Central London office and retail warehouse returns held up, at 0.8% and 0.7% respectively, but there was further weakness in all other market sub-sectors where values fell back over the month. Central London offices and retail warehouses were also the best performing sub-sectors over the year with total returns of 12.7% 9.0% respectively.

Outer London / M25 and Rest of UK offices under-performed over the month with total returns of 0.1% and 0.0. In both cases the income return was largely or wholly offset by declining capital values. These were also the weakest performing sub-sectors annually, with total returns of 4.8% and 3.3% respectively.

Rental values were unchanged in December, as growth in Central London offices was offset by declines across the retail sector. Rental values were flat over 2011 as whole.

David Wylie, Head of Economics & Forecasting at CBRE, said: "The 8.1% total return for the UK commercial property market this year was a respectable performance given the broader economic background, and compares favourably with the other main asset classes. Returns were largely due to income, however, as capital growth of 1.9% over the year was fairly modest, and confined to the first six months of the year.

"Performance across different parts of the market, and more importantly across different grades of property, was very skewed in 2011, with strength in Central London offices and prime assets in particular helping to offset weakness elsewhere."

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