UK Commercial Real Estate Values Grow By Double Digits Over Past Year

While recovery across sectors in the UK commercial market is mixed, the overall trend is positive. All sectors saw double digit capital growth over the past year, and …

While recovery across sectors in the UK commercial market is mixed, the overall trend is positive. All sectors saw double digit capital growth over the past year, and commercial property values climbed over 15%. See the following article from Property Wire for more on this.

UK commercial property prices have increased by 15.6% in the last 13 months but the different sectors are recovering at different rates, according to a new report.

Capital appreciation in UK commercial property markets has eased to the shallowest monthly growth, at 0.1%, since the rebound began last summer, according to the latest index to be published.

The August IPD UK monthly Index indicates that the positive growth, together with a 0.6% income return delivering a monthly total return of 0.7%, is also the mildest monthly capital appreciation recorded in more than six years, reflecting a fractional three basis points rental decline offset by a degree of yield compression. Rents and yields have been contrary influences on capital growth for 17 months.

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According to the report UK commercial property values have risen by 15.6% in the last 13 months, while the 2010 year to date growth now stands at 6.2%. The month is marked by the industrial market delivering the first sector capital depreciation since the recovery, at a fractionally negative five basis points, while retail and offices rose by 0.1% and 0.2% respectively.

The sector recoveries have differing beginnings and now endings. ‘Prior to this month’s capital depreciation in industrials, the sector completed a 13 month unbroken 10.8% capital growth to July but still reported the shallowest rebound among the sectors. This compares to the 14 month rebound in the retail sector, which has so far amounted to 18.7%, and a 13.9% value rise in the office sector over the 12 months to August,’ the report says.

The rental picture also reflects a deviating pattern. After a 0.1% rental growth in the industrial sector over July, rents have declined again by approximately the same amount, while retail rents have completed a -9.3% unbroken decline since September 2008.

By contrast, office rents rose for the fourth consecutive month in August, by 0.1%, and by 0.6% since May. The office market is the only sector to benefit from both rents and yields having a positive influence on capital growth, albeit at modest levels.

‘On the eve of the two year anniversary of the collapse of Lehman Brothers, it is worth remembering the property market storm which erupted two years ago. Subsequent to the investment bank’s demise, property values declined at the fastest pace in the history of the IPD UK Monthly Index,’ said Phil Tily, managing director of IPD UK.

‘Two years on and markets have, for now at least, plateaued as rents and yields moved fractionally in August following the trend of recent months. However, calm periods are as good a time as any to reinforce the message that investors should remain vigilant of any risks within their property portfolios,’ he added.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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