Total returns edge higher in March – CBRE
Total returns from UK commercial property in March reached 0.5% at the All Property level, according to the latest CBRE monthly index, taking the total for the first quarter to 1.2%. This follows a 0.4% return in February. Capital values continued to fall, dropping 0.1% for All Property, resulting in a decline of 0.4% for the first quarter of 2013.
CBRE says capital values declined in all major sectors of the market, apart from Central London offices, where they rose 0.5% thanks to a particularly strong performance by West End offices and City office space. After smaller capital value growth of 0.1% in February, West End office space reported 0.8% growth in March, with total returns for March rising 1.1% after gaining 0.5% in February. In the City offices recorded an increase of 0.1% in capital values and total returns of 0.5%. At the All Offices level, the sector recorded capital growth of -0.1% and total returns of 0.4%.
The decline in capital values within the retail sector slowed at the All Retail level in March to a fall of 0.1%, while total returns increased to 0.5% from a 0.4% gain in February. Total returns for industrial property in March were 0.6%, driven by income rather than capital value growth.
Rental values remained flat overall for the third month in a row, with Central London offices the only sector to record an increase in rents. West End offices produced rental growth of 0.5%, City offices 0.3% and Midtown offices 0.1%.
Aleksandra Starczynska, analyst at CBRE Research, says the monthly index has continued to reflect the sentiment of the UK investment market. “Almost one third of investments (28.7%) in Q1 2013 across the UK were made in Central London offices,” she points out. Total activity across the rest of the country is starting to increase, she adds. “Simultaneously, we are starting to witness a shift in the buyer profile in the UK with domestic investors becoming far more active in Q1, making up 58% of buyers.”
