London offices produce strongest returns in April
The market for office space in Central London again performed more strongly than other commercial property sectors during April, said CB Richard Ellis as it unveiled its Monthly Index report last week as voters went to the polls.
The All Property total return for April fell to 1.6% from 2.6% in March while capital growth slowed to 1.0%, taking the year-to-date increase to 5.4%. Total returns for Central London offices were 2.6% on the back of capital growth of 2.1%, CBRE noted.
Returns in the office sector “continue to be driven by yield compression, with the equivalent yield falling by 20bp over the month, despite a further decline in rental values, which fell by 0.2% over the month,” the group said.
By contrast, the retail sector’s performance slowed to a total return of 1.4% from 2.9% in March. Retail warehouses were the strongest subsector in April, with a total return of 1.7%. Shopping centres produced a return of 1.3% while high-street shops struggled by comparison with a total return of 1.2%.
Rental values dipped 0.2% in April overall, the same decline as in March, with high-street shops under the most pressure.
David Wylie, head of economics and forecasting for CB Richard Ellis UK, said that UK property remained attractively priced compared with other asset classes, noting that the All Property equivalent yield was 7.0%. “Given some further tightening in yields and an improving occupier market outlook, 2010 should still provide strong returns overall,” he added.
