Despite a solid finish to 2011, UK commercial property performance weakened slightly in January, with total returns of 0.3 per cent, down from 0.5 per cent in December, according to CBRE’s latest Monthly Index.
While Central London witnessed a values fall of 0.1 per cent in January, Retail Warehouses bucked the wider trend as values remained flat (total returns of 0.4 per cent). January also saw office values fall by 0.2 per cent in line with both the industrial and retail sectors.
Amid a weakening occupier market, All Property rental values fell by 0.1 per cent in January. Industrials were the worst affected, with rental values falling 0.3 per cent, whilst All Retail and All Offices saw rental values fall 0.1 per cent last month.
Nick Parker, Senior Analyst of Economics & Forecasting at CBRE, said: “There was some encouraging transactional activity that took place in December, amounting to c£5.5bn of commercial real estate investment in the final month, taking the 2011 total just shy of £34bn. December’s glut was predominantly thanks to overseas investors filling their boots with UK property, in a market where buyers currently hold the cards. Over the next 12 months we foresee international investors group remaining a key component of the UK property investment, as they have increasingly become over the past 10 years.
“This month’s overall property performance isn’t surprising; sentiment has been weakening in line with the global economic slowdown since the middle of last year, and whilst it is a weak start to 2012, performance this year will be largely dictated by how events unfold in the Eurozone.”
January 2012 UK Monthly Index snapshot:
– All Property total returns were 0.3 per cent in January, with capital values down 0.2 per cent.
– Offices and industrials saw a mild outperformance over retails this month, with total returns of 0.3 per – cent vs 0.2 per cent in retail.
– Central London offices saw values fall by 0.1 per cent in January.
– Rest of UK and Outer London / M25 offices continued to see weak performance, with values down by 0.4 per cent in both markets this month.
– Retail warehouse marginally outperformed shops with values flat compared with down 0.1 per cent. Shopping centres saw values fall 0.5 per cent this month.
– Rental values fell by 0.1 per cent over the month, a slight deterioration on last month.
– Equivalent yields were unchanged over the month at 6.6 per cent.