United Kingdom Commercial Real Estate Rebounding Faster Than Expected

A strong finish for UK commercial property to close out 2009 should bringing with it an infusion of capital into real estate funds, and roused interest from overseas …

A strong finish for UK commercial property to close out 2009 should bringing with it an infusion of capital into real estate funds, and roused interest from overseas investors. Central London offices and retail warehouses have led the commercial sector comeback, regaining ground since the market’s perilous plunge. For more on this, see the following article from Property Wire.

UK commercial property ended 2009 in an exceptionally strong position with total returns of 3.9% for December, tanks to demand from overseas investors and renewed interest from real estate funds, research shows.

And on an annual basis property saw positive returns of 4%, a massive turnaround on the largely negative expectations held during the first half of the year, according to the latest CBRE Monthly Index.

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All property capital values rose by 3.3% over the month, the largest single month’s growth in the index history, led by further strong performance of retail warehouses where intense investment demand meant capital values surged by a massive 6.1%.

The six month spurt in retail warehouse performance has meant that values are actually 6.5% higher than they were at the end of 2008, with a total return of 15.6%, by far the best performer of 2009.

Central London offices also continued their strong performance in December with capital value growth of 3.7%, leaving the annual figure only marginally down at -2.1% for 2009.

Rental values continued to correct, with a further fall of 0.3% in December. On an annual basis this meant rental values are 8.9% lower than the end of 2008. Central London offices rental values are down 21.5% on a year ago.

‘The sharply accelerating returns and value increases seen over the past few months inversely mirror the worst of the downturn seen this time last year. Rapid yield compression of 100bp since mid-year has lifted property values by 10.3%, with stronger growth in retail warehouses and Central London offices,’ said Peter Damesick, Head of UK Research at CBRE.

‘Strong demand from overseas investors and renewed flows of money into UK property funds have been the key drivers of growth, with limited availability of good quality assets to buy. Increased capital flows into property look likely in the near term, giving further momentum to the market in the early part of 2010,’ 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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