London market boosts commercial property returns
Tuesday 11th January 2011
The CB Richard Ellis UK Monthly Index recorded a return of 1.1% for commercial property in December, rounding off a strong year which saw values increase by 8.9% and total returns of 16.1%.
The robust annual headline result was buoyed by a stellar return for Central London offices of 27.3%.
December UK Monthly Index snapshot:
* All property values rose by 0.6% over the month, producing total returns of 1.1%;
* Offices were again the top performing sector, with capital growth of 1.0% and total returns of 1.6%;
* Retail performance also improved this month, with retail warehouses and shopping centres performing in tandem at 1.1% total returns, while shops saw returns of 0.6%;
* Industrials, despite being the weakest performing sector this month, with total returns of 0.8%, saw a surge in performance from the 0.3% return recorded last month.
* Over 2010 as a whole offices were the strongest performing sector with a total return of 19.5% and capital growth of 12.3%, while industrials were the weakest sector with returns of 11%. Retails recorded a total return of 15.5% and capital growth of 8.6%;
* All Property rental values were flat in December, with the year as a whole recording a fall of 1.2%.
David Wylie, Head of UK Economics & Forecasting, CBRE, said: "Overall, 2010 was a stronger year than many expected at the start, albeit one in which performance has faded as the year progressed. What has become increasingly evident has been the huge divergence in performance between commercial property sub-sectors.
"This can be broadly categorised by outperformance in Central London and weakness in the UK regions, although the divergence is also apparent between prime and secondary property in all segments. Income security and risk aversion have been the key differentiators of prime performance over 2010, with the appetite for secondary stock failing to see any meaningful recovery.
"Occupier market fundamentals also differed widely over the year, with a lack of new space and strengthening demand in the Central London office markets causing a significant upward swing in rental values, while most other occupier markets continued to struggle."
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