CBRE Monthly Index – market supported by continued growth in Central London
London, 8 July 2011 – Latest figures from CB Richard Ellis for June show that overall the UK Commercial property market continued to perform in line with the previous month, with capital growth of 0.2% and total returns of 0.7%. Aside from the continuation of buoyant performance in Central London offices and retail warehouses, driven largely by growth in rental values, nearly all remaining sub-markets saw values either flat over the month or under slight downward pressure. Equivalent yields were unchanged over the month at 6.6%.
June UK Monthly Index snapshot:
• Capital values at the All Property level increased by 0.2% over the month, with total returns of 0.7%. • Office returns of 1.0% were double the rate seen for both retails and industrials, which trailed on 0.5%. • Central London offices were again the strongest performing sub-market, with returns of 1.4% far out-pacing the 0.7% recorded by second placed retail warehouses. • Office returns continue to diverge, with strong performance in Central London contrasting with weaker returns of 0.3% in Outer London / M25 and 0.5% in the Rest of UK. • Unusually, the retail sub-sectors also diverged in June, with retail warehouses and shopping centres producing relatively steady returns of 0.7% and 0.6%, while High Street shops fell to 0.3% following a 0.2% correction in values. • Rental values were flat overall in June, although growth of 0.5% in Central London offices was significant in offsetting continuing declines in nearly all other market sub-sectors. • All Property equivalent yields remained unchanged at 6.6% over the month.
David Wylie, Head of Economics & Forecasting at CBRE, said: “The continuing strength of returns in the Central London office market has largely been responsible for the 1.6% increase in capital values in the wider Monthly index over the past six months. However, the remainder of the market now appears to be lacking momentum, with transaction volumes down and occupier markets showing signs of renewed stress.”