Positive momentum continues for Central London offices – CBRE
The latest Monthly Index from CBRE shows that July was another relatively static month, with All Property values up 0.1% after the 0.2% increase in June. This minor improvement was made thanks to a small downward movement in the equivalent yield, while rents were stable, the firm says. All Property total returns for July came in at 0.6%, taking the year-to-date total return to 5.3%.
The positive momentum in the Central London market for office space continued last month, with capital growth of 0.3% compared with the slide of 0.1% in capital values for office markets outside the capital. Capital growth for Central London offices is now at 5.0% for the year to date, with a total return of 8.3%. CBRE says the London Midtown market was particularly buoyant in July, with capital values up 0.5%, while the West End remained static – this was the first month in which there was no growth in the West End market since it turned in 2009, it notes.
For the offices market overall, the total return rose 0.7% in July, taking year-to-date returns to 6.1%. Retail and industrial property each produced a total return of 0.5% last month. The year-to-date return for retail is now at 5.0%, while for industrial property the figure is 4.5%.
Nick Parker, senior analyst at CBRE, said: “In July we saw a marginal increase in UK property values due largely to the strength of the Central London office markets. The occupier markets in Central London remain buoyant, driving rents and capital values up, and highlighting the relative merits of greater income security to investors. This, coupled with a general scarcity of good assets, has meant that London has seen sustained growth over the past two years.”
Rental values were flat overall in July, although positive growth of 0.8% in Central London offices offset declines in both the retail and industrial markets, CBRE noted. It said All Property equivalent yields remained unchanged at 6.6%.
