Central London property performance continues to outpace the wider UK market

London, 8 November 2011 – UK commercial property performance remained constant in October, with total returns of 0.6 per cent, matching September’s figure, according to CBRE’s latest Monthly Index.

Year to date, total returns are 7.1 per cent, with capital growth of 2.0 per cent in the UK property market over this time. Central London offices continued to out-perform the other UK market sub-sectors in October, although City office total returns slowed to 0.6 percent from 1.0 per cent in September. Performance in London’s West End and Midtown were stronger than the previous month at 0.8 per cent and 0.9 per cent respectively. Reflecting the weakness in other property sub-sectors, values fell for shopping centres, Outer London / M25 offices and industrials.

David Wylie, Head of UK Economics & Forecasting at CBRE, said: “The growth in property values over the past month continues to be relatively skewed towards Central London offices, with strength there more than offsetting weakness elsewhere. With the UK market as a whole seeing virtually no movement in yields over the past six months, rental growth has provided the key difference. In the year-to-date Central London offices have seen values rise by 6.3 per cent, which has been almost wholly supported by rental growth. By contrast, the slide in high street shop and shopping centre rental values has been a significant factor in holding back overall retail sector capital growth and returns.”

October UK Monthly Index snapshot:
•Overall capital values grew by 0.1 per cent this month, with total returns of 0.6 per cent.
•Office returns improved to 0.7 per cent in October from 0.6 per cent last month, with capital growth of 0.2 per cent
•Central London offices saw the strongest sub-sector returns at 0.8 per cent, with capital values up by 0.4 per cent following rental growth of 0.8 per cent.
•Shopping centres saw the weakest sub-sector returns at 0.2 per cent, as a result of a 0.3 per cent fall in values over the month.
•Retail warehouse and high street shop returns held up over the month, matching the 0.6 per cent and 0.5 per cent recorded in September.
•Outer London / M25 Office values fell by 0.2 per cent, pulled down by further rental declines.
•Rest of UK office total returns improved to 0.5 per cent following a 0.1 per cent increase in capital values.
•Industrial returns weakened to 0.5 per cent this month, with values falling by 0.1 per cent.
•Overall rental values were broadly flat over the month, increasing by 0.1 per cent.
•Equivalent yields remained unchanged for a sixth consecutive month at 6.6 per cent.

November 2011
November 2011