London office and retail space is prospering, according to the latest data from Cluttons. Returns for well-placed office space are already in the double digits and many secondary locations are expected to move into similar positions by the end of the year while retail space fairs just as well. The Cluttons Commercial Property Market Outlook attributes a great deal of value growth to improved satisfaction among tenants, which indicates foreign landlords are doing a fair job since international investors have accounted for a whopping 70% of London’s office investments this year. For more on this continue reading the following article from Property Wire.
Total returns for central London offices and retail are expected to move into double digits during 2013 as occupier confidence fuels growth, it is claimed.
Returns are set to achieve between 14 to 16% for prime office assets in the West End and City markets, the highest levels since the end of 2011, according to the latest report from Cluttons.
Central London retail has also witnessed resurgence in demand with total returns of 17 to 18% forecast for 2013, the highest levels for almost three years.
Upbeat sentiment and lack of supply, has seen Cluttons forecast rental value growth of 6% for Central London offices in 2013, the highest growth rate for 16 months.
International investors, which have accounted for 70% of London based office investments so far this year, continue to dominate the market.
The report also points out that bidding wars have encouraged UK institutions to refocus outside the capital for well presented properties across all sectors. This is especially true for assets with secure, long dated income.
In its Commercial Property Market Outlook (CPMO), Cluttons has reported that improved occupier sentiment is driving increasing rental value growth, particularly within the Central London office and retail market.
Although the wider UK regions continue to witness limited rental value growth, offices remain the strongest performing commercial sector, underpinned by intense demand and robust performance within Central London and the south east.
‘The market is clearly benefiting from increased confidence, indicated by the diversification of international investors who continue to dominate the market. Increased competition and limited supply continues to drive an upturn in capital values within Central London, with trophy assets often transacting well ahead of asking price as a result,’ said Sue Foxley, head of research at Cluttons.
‘There are opportunities outside the capital, however. Investors have recognized that London’s market is highly competitive and that they must broaden their horizons as yields harden. There is sustained interest in well located, high quality assets, particularly in key locations within the M25. The south eastern office market is anticipated to produce total returns of around 12% this year, the highest levels recorded in nearly three years,’ she explained.
She also pointed out that as the economy returns to growth, well located and well let retail outside Central London is attracting renewed investor interest with keener prices being paid for the best stock. In terms of the industrial market, well let regional sheds offer good value potential, though supply remains restrictive.
This article was republished with permission from Property Wire.