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Some respite for UK commercial property

Central London saw its first month where values were unaltered after a predominantly positive three years for office property in the capital. So far they have recovered 46.4% in value, and now sit only 21% below the peak of 2007.

Nick Parker, Senior Analyst of Economics & Forecasting at CBRE, said: “The rate of decline for UK property hasn’t worsened, as many would have expected this month. This perhaps signals an inflection point in the market, as investors sit on their hands and wait for some green shoots.

“Foreign investment remains crucial at this juncture, with Central London remaining the focal point for both the UK and Europe, with 75% of all transactions in the capital attributable to foreign purchasers in Q2.

“There is definitely scope for some entrepreneurial investors to make a mark in the UK property market in coming years, with yields on secondary property still extremely high amid occupier uncertainty, and theoretical borrowing rates at extreme lows.”

CBRE UK Monthly Index snapshot – June 2012:

– All Property total returns were 0.0% in June, with capital values down 0.5%.
– Year to date, capital values have fallen by 2.3%.
– Central London offices remain the strongest sub-sector, with values flat over the month, following an 0.4% rise in May. Overall office values fell 0.3%,
– Retail property performance was again weak this month, with values down by 0.6%, as all sub-sectors saw values decline.
– Overall office values fell 0.3%,
– Industrial continues to benefit from a larger income return, with total returns of 2.0% so far this year; however values fell by 0.3% over June.
– Rental values were again flat this month, highlighting the fact that capital declines are largely yield driven at present. So far this year rental values have fallen 0.3%.

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