Central London offices still outperforming wider UK market – CBRE
Total returns from UK commercial property across all markets so far this year have reached 7.1%, with capital growth of 2.0%. For October, total returns were 0.6% (as in September) following another strong performance from Central London offices in October (returns 0.8%, capital values up 0.4%), says CBRE in its latest Monthly Index.
Office returns were 0.7% overall in October, up from 0.6% in September, with capital growth of 0.2%. The index shows total returns from City offices slowed to 0.6% from 1.0% in September, while the markets for office space in the West End and Midtown offices gained strength with returns of 0.8% and 0.9% respectively. Office space in Outer London/M25 saw values fall 0.2%, pulled down by further rental declines, while returns for offices in the rest of the UK improved to 0.5% with capital values up 0.1%.
Within retail, shopping centre values fell 0.3% and returns were 0.2%, while retail warehouse and high-street shop returns held up over the month to match September’s 0.6% and 0.5% respectively. The overall total return for retail was 0.4%. Industrial values fell 0.1%, with returns weakening to 0.5%.
CBRE’s head of UK economics and forecasting, David Wylie, notes that with hardly any movement in yields over the past six months for the UK market as a whole, rental growth has provided the key difference. Overall rental values were up 0.1% for the month while equivalent yields were unchanged for the sixth month in a row at 6.6%. Central London offices so far this year have seen values rise by 6.3%, “which has been almost wholly supported by rental growth”, Mr. Wylie says, whereas rental values for high-street shops and shopping centres have been a significant factor in holding back overall capital growth and returns for the retail sector.
