INDUSTRIAL PROPERTY SPARKLES ONCE MORE AS COMMERCIAL PROPERTY ENDS 2016 ON A HIGH NOTE
London, 10 January – December delivered very strong commercial property investment returns, at 1.1% for the month, according to the latest CBRE Monthly Index. The 2016 annual total return for UK commercial property investment was 2.7%, though. Industrial property delivered a total return of 7.2%. Capital values rose by 0.6% over the month and rental values increased by 0.2%. Although December’s index results are positive, rental and capital values have not yet recovered to their June pre-referendum levels.
Overall in 2016, All Property capital values fell by -2.4% in part a response to March’s stamp duty tax changes and June’s EU referendum. The Industrial sector outperformed all other sectors in December with a 1.4% increase in capital values, the highest monthly growth for 2 years. The Office sector also recorded a strong performance in December rising by 0.5% over the month.
UK Commercial property rental values grew slightly in December, rising 0.2% over the month. Retail sector rental values held firm for a second month while the Office sector recorded an increase of 0.3%, supported by Outer London/M25 offices (0.2%) and driven by Rest of UK offices (0.7%). Rental values were flat across Central London offices. Industrial rental value growth also outperformed in December, at 0.5%.
Despite a year characterised by political uncertainty, rental value growth has continued, with rental values across the UK rising by 1.7% taking 2016 as a whole.
The traditional end-of-year surge in property markets delivered some good news in monthly valuations, with growth across the board during December, in contrast to the somewhat unstable summer and early autumn. Industrial property made a major contribution to overall averages in 2016, reflecting the continued growth of online retailing. With less than a year’s supply available in ‘big box’ logistics property, we predict it will do so again in 2017. Despite Brexit worries, office rental growth has also surprised on the upside, delivering a respectable 2.4%. However, for occupiers across all sectors, 2017 will not be without its challenges.