Property values stalled in November – CBRE
CBRE’s latest Monthly index shows that UK commercial property values were flat during November, after seven months in a row of incremental capital value increases. Overall total returns were 0.4% for November, down from 0.6% in October. Year-to-date total returns for commercial property are now 7.6%, with capital growth at 1.9%.
Once more, capital growth remained positive in Central London, with most other subsectors apart from shops and retail warehouses seeing marginal declines in values. Shopping centres, industrial property and offices outside London were among the subsectors that saw values slide last month, CBRE says.
Office returns overall weakened to 0.5% for November from 0.7% in October, with capital values flat for the month. Central London office space produced returns of 0.7%, with capital values up 0.3%. Offices in the Outer London/M25 subsector were the weakest, recording a 0.5% fall in values last month and a marginally positive return of 0.1%, CBRE notes. For the rest of the UK, offices total returns weakened to 0.2%, in line with returns from shopping centres.
Retail warehouse and high-street shop capital values were flat in November – both produced total returns of 0.5%, compared with the 0.4% recorded for the retail sector as a whole. Values for industrial properties fell 0.1% and total returns were 0.4%, slightly weaker than in October.
In terms of rental values, shops, shopping centres and regional offices were all weaker, but this was offset by growth in Central London office (+0.3%) and retail warehouse rental values. Rental values overall were flat in November, and remain unchanged for the year to date.
CBRE’s senior analyst of UK economics and forecasting, Nick Parker, says the research shows that more widespread weakness began to creep into the UK commercial property market for the first time in November, with more subsectors seeing falls in capital value than gains. “This comes as little surprise to most observers, with market momentum gradually fading over the past seven months,” he points out. He notes that investors appear to have narrowed their focus, against a background of economic uncertainty resulting from weaker fundamentals in the UK economy and the eurozone crisis, to the super-prime end of the market, at the expense of assets further up the risk curve.
