City offices drive modest capital growth in May – IPD
The IPD monthly index for May shows modest capital growth of just 0.1%, but rental growth moved back onto positive ground during the month – albeit by just four basis points. Phil Tily, managing director for UK & Ireland, says that this shows capital growth is still reliant on further reduction in yields.
“As yield compression runs its course, any further uplift will become increasingly dependent on a strengthening of the underlying occupier market,” he added.
The offices sector produced capital growth of 0.4%, driven by a 0.2% recovery in rental values, Tily noted. “This was again off the back of a strong performance by properties in Central London, which saw a steady increase in capital appreciation and improved level of rental value growth, up by 60 basis points over the month, led principally by renewed levels of growth in the City,” he added.
Total return at an all-property level remained at 0.7%, with most of this (0.6%) income-based, IPD said.
