Office investment offers strongest Q1 returns – Jones Lang LaSalle
Offices offered the strongest returns on investment during the first quarter of this year, says Jones Lang LaSalle. The firm’s Q1 2012 UK Property Index shows that the office sector produced the strongest returns for the quarter at 0.9%, followed by industrial units and warehouse properties, at 0.8%, and retail premises, at 0.3%.
Property total returns fell to 0.7% overall in the first quarter from 1.4% in Q4 2011 as the declines in capital values worsened, to –1.0% from –0.2% in Q4 2011. Annual returns of 6.1% for the past 12 months represented a significant drop from the 10.9% recorded at the end of 2011. “Growth was driven by income as capital values dipped below last year’s levels,” the firm said.
JLL’s research showed that rental growth for all property remained stable in Q1 at 0.2%, driven largely by the office sector, which reported growth of 0.9% for the quarter.
Mike Penlington, director in JLL’s valuation advisory team, said secondary assets (value properties) had continued to struggle, “with annual returns of just 2.3% compared with 8.3% for prime (growth) properties in Q1 2012”.
“In addition the index shows that capital values for secondary assets slipped further in Q1 2012 by –2%. We would expect that prime assets will continue to outperform more secondary assets as the market continues to demand a higher premium for taking on more risky situations,” he added.
