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Commercial property continues capital growth - CBRE

Monday 8th March 2010

By Mike Jones

Commercial property enjoyed a re-acceleration of capital growth in February, bouncing back after a slower than expected start to 2010.

According to the latest CB Richard Ellis Monthly Index, capital values rose by 1.4% in February - producing total returns of 2.0% for All Property.

Central London offices once again were the best performers over the month, with total returns of 2.6% and capital growth of 2.1%. Shopping Centres also performed strongly, with a total return of 2.4% and capital growth of 1.8% in February, finally enjoying some catch up after a very weak 2009.

All Property rental values continued to decline, with a fall of 0.2% suggesting that occupier markets are still under pressure. However, Central London offices recorded flat rental growth in February, pointing towards firmer occupier demand in the capital.

Nick Parker, CB Richard Ellis Economics and Forecasting Analyst, said: "The general sentiment in the market currently is that property is approaching fair value, with ongoing yield compression expected in the short term.

"While it was prime yields that came back in most aggressively in the latter half of last year, it is the better secondary markets that are slowly starting to attract interest at the beginning of 2010, with investors beginning to look further up the risk curve in a hunt for better returns. It is widely expected that the yield gap between prime and secondary property will slowly narrow over 2010 as competition for good secondary assets becomes more heated."

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