UK commercial property returns increase marginally

The overall Central London commercial property market remained robust, as capital growth stayed positive at 0.1%, largely driven by the West End and Midtown sub-sectors.

This is in no small part down to the strength of occupier markets in the Capital, which saw bumper rental growth of 0.7% this month, helping to offset softening yields in some other sub-sectors.

There was also a slight improvement from retail property in April, which delivered flat total returns (March 2012: total return of -0.1%), as growing income offset capital declines. This small gain was largely due to a better result reported by retail warehousing, which saw a positive total return of 0.2% in April.

Nick Parker, Senior Analyst of Economics & Forecasting at CBRE, said: "Buyers continue to take a cautious stance in 2012, influenced by prevailing economic uncertainty. That said, London remains a clear focal point for active investors, with a strong £3.7billion exchanged in the first quarter, driving continued competition and positive capital growth in April.

"With the Olympics and Jubilee celebrations fast approaching, it is widely expected that traditional purchasers of UK property may well take a longer than usual summer break and resume activity in the third quarter, when they will also expect to have greater clarity on the economic outlook, particularly with the UK now in a technical recession. The end of this investment hiatus, coupled with the fact that we continue to see a healthy weight of capital allocated to UK property, could spell the turning point of this current weak period, with yields flattening out and economic traction starting to feed through into more stable occupier markets."

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