CBRE November Monthly Index

London, 8 December 2011 – After seven months of incremental capital value increases, UK commercial property values stalled in November, with total returns of 0.4 per cent, down from the 0.6 per cent recorded in October, according to CBRE’s latest UK Monthly Index.

Year-to-date total returns for commercial property are now 7.6 per cent, with capital growth of 1.9 per cent over this time. Central London capital growth managed to remain positive, although the majority of other sub-sectors saw marginal decreases in values. Shops and Retail Warehouses were the only other two major sub-sectors to avoid falls in values this month, with Shopping Centres, Industrials and offices outside the capital all seeing values slide in November.

Rental values held firm in November, as weakness in Shops, Shopping Centres and Regional Offices were offset by growth in the Central London Office and Retail Warehouse sectors. So far this year, rents remain flat on the CBRE Monthly Index.

Nick Parker, Senior Analyst of UK Economics & Forecasting at CBRE, said: “November was the first month this year where more widespread weakness started to creep into the UK property market performance with more real estate sub-sectors seeing capital value falls than gains. This comes as little surprise to most observers, with market momentum gradually fading over the past seven months. Given the wider economic uncertainty caused by weak fundamentals in the UK economy plus the growing threat posed by the Eurozone, it now seems that investor appetite has once again become more narrowly focused on the super-prime end of the quality spectrum at the expense of assets further up the risk curve.”

November UK Monthly Index snapshot:
•Overall capital values were flat this month, with total returns of 0.4 per cent.
•Office returns weakened to 0.5 per cent in November from 0.7 per cent last month, with capital values flat over the month.
•Central London offices again saw the strongest sub-sector returns at 0.7 per cent, with capital values up by 0.3 per cent, and rental growth of 0.3 per cent.
•The Outer London / M25 Office sector was the weakest property sub-sector this month, as values fell by 0.5 per cent, delivering a marginally positive return of 0.1 per cent
•Rest of UK office total returns also weakened in November to 0.2 per cent, on a par with the Shopping Centres.
•Retail warehouse and High Street shop capital values were unchanged this month, with both sector delivering total returns of 0.5%.
•Industrial property saw values fall by 0.1% again this month, with total returns of 0.4%, a marginal deterioration on the previous month.
•Overall rental values were flat over the month, with the year to date also seeing rental values unchanged.
•Equivalent yields were unchanged over the month, staying at 6.5 per cent.

December Monthly Index
December Monthly Index