UK property market remained polarised in December – CBRE
UK commercial property produced a total return at the All Property level of 0.3% in December, following a 0.2% return in November, says CBRE. The firm’s Monthly Index last month showed a continued decline in capital values, which fell 0.2% in December to take the overall drop for 2012 to 3.6%. The annual total return for 2012 overall was 2.0%.
Central London offices again stood out from the rest of the market, with capital values up 0.9% in December in contrast to the declines seen in all other major sectors, says CBRE. For the whole of 2012, the market for office space in Central London produced a 4.2% increase in capital values, led by the strength of the West End offices submarket.
Returns from offices were the strongest over the whole year, at 4.5%, while returns for industrial property reached 3.7% for 2012 and the retail sector produced a negative return of –0.1%. Central London offices produced total returns of 9.0% for the year – and within this, the equivalent figure for offices in the West End was 11.1%. By contrast, offices in the rest of the UK were the weakest performing sub-sector in December and for the year as a whole, with total returns of –0.8% in December and –5.9% for 2012.
Rental values were up 0.1% in December at the All Property level – the second month in a row that rents increased – with the increase driven largely by Central London office rents. Rents for retail premises and industrial units were flat in December, as were rents for offices outside Central London.
David Inskip, associate director at CBRE, said: “The 2.0% annual total return for the UK commercial property market hides the underlying story of continued polarisation between Central London offices and the rest; the annual total return of 9.0% for Central London offices in 2012 is striking given the economic climate. It will be interesting to see how sentiment reacts to the economic outlook in 2013, which is expected to improve, delivering modest GDP growth.” CBRE expects modest economic growth this year, with consumer spending and business investment both picking up, but has warned that the main risks to this forecast lie in the wider global economy – the US fiscal cliff negotiations and the eurozone debt crisis have not gone away.
