CBRE Monthly Index - UK Property Market Enjoys Positive Growth in October
London, 5th November 2010 – The UK commercial property market continued to see positive capital growth this month, with values up by 0.2% according to the CB Richard Ellis’ UK Monthly Index. This unexpected buoyancy came thanks to the Central London office market, which unlike the rest of the market is enjoying strong growth thanks to increasingly restricted supply and a positive rental growth outlook.
October UK Monthly Index snapshot:
• All property saw capital growth of 0.2% and a total return of 0.7%.
• Offices were again the top performing sector, with capital growth of 0.5% and total returns of 1.0%.
• Industrial was the weakest performing sector, with total returns of 0.5% with capital values unchanged over the month.
• All retail sub-sectors saw similar performance in October, with capital growth of 0.1%. Retail warehouses and shopping centres saw a marginal outperformance with total returns of 0.6%, whilst high-street shops saw returns of 0.5%.
• All Property rental values fell by 0.1% in October, with growth in Central London offices countering weakness elsewhere.
Nick Parker, Senior Analyst with CB Richard Ellis, said: “Positive total property returns surprised once again this month, with capital values continuing to defy weaker sentiment, growing by 0.2%. However, the market continues to lack direction, and aside from Central London offices the other subsectors may be nearing an inflection point.
“Contrary to the wider market slowdown, investment volumes are picking up, with total turnover for 2010 looking certain to surpass 2009’s £25bn. UK institutions and foreign investors have been among the most active, accounting for around two thirds of the total investment so far this year.”
Highlights from October’s UK Monthly Index:
• Capital values for All Property grew by 0.2% in October, with total returns of 0.7%. The divergence in performance between sub-sectors persisted, with Central London values delivering a far stronger performance.
• Offices were the strongest sector – returning 1.0% overall – but this again was driven by the strength of the Central London market, which saw total returns of 1.4% and capital growth of 1.0%.
• Office markets outside the capital continued to underperform in October; however Rest of UK offices saw an improvement on their negative return last month, delivering flat capital growth and returns of 0.6%.
• Industrial property values were flat in October, delivering returns of 0.5%.
• Rental growth at the All Property level fell by 0.1%, with Central London offices largely countering the wider fall, with a rise of 0.4%.
• Property yields on the whole stayed flat in October at 6.8%, with any downward movement now isolated to Central London markets.