Investors await green shoots – CBRE
There was a slight improvement overall in UK commercial property performance last month, says CBRE, whose Monthly Index shows a 0.5% fall in values during June after a 0.6% decline in May. This has helped to flatten the overall total return figure in June to zero after a dip of -0.1% in May. So far in 2012, commercial property values have fallen by 2.3%, with total returns coming in at 0.6%.
Some might have expected values to worsen in June but Nick Parker, senior analyst of economics and forecasting at CBRE, says the small improvement “perhaps signals an inflection point in the market, as investors sit on their hands and wait for some green shoots”.
Values for Central London property were unchanged last month, for the first time after a “predominantly positive three years for office property in the capital,” CBRE says. They have so far recovered 46.4% in value and are now only 21% below their 2007 peak. Values for Central London office space were up 0.4% in May. Office values for the UK overall fell 0.3% in June with a total return of +0.1%, taking the year-to-date total return to +1.3%.
The retail sector saw a 0.6% fall in values last month, with all subsectors seeing declines. The sector’s total return so far this year is -0.5% after a drop of -0.2% in June.
Industrial properties continued to benefit from a larger income return, with total returns of 2.0% so far this year after a 0.3% increase last month; however, values declined by 0.3% in June.
Nick Parker says there is definitely scope for some investors “to make a mark in the UK property market” in the next few years, with yields on secondary property still very high amid occupier uncertainty, and theoretical borrowing rates at extreme lows. He notes that Central London remains the focus of foreign investment, with 75% of all transactions in the second quarter of 2012 in London attributable to foreign purchasers.
