The market for available office space in Central London continued to outperform the rest of the UK’s commercial property markets during May, says CB Richard Ellis. The firm’s Monthly Index for May shows Central London offices produced total returns of 1.0% for the month, taking year-to-date total returns to 6.0%. Returns from the rest of UK offices were flat, caused by a 0.5% decline in values. The offices sector overall produced returns of 0.8%.
All Property total returns in May were 0.7%, with property values rising 0.2% during the month.
The retail sector continued to produce capital growth, at 0.2% in May, with returns of 0.7%. Within this sector, shopping centres were strongest with total returns of 0.8% as values grew 0.3%.
There was no capital growth in the industrial sector in May, leaving total returns at 0.5%. “Industrial property remains very much the weakest sector so far this year,” CBRE said.
All Property rental values came down by 0.1% in May, with only the City and West End offices seeing positive rental growth during the month.
Nick Parker, senior analyst at CBRE, said: “What investors are increasingly finding attractive about offices in Central London is not just the income security afforded by large occupiers, but also that rents are enjoying significant uplift due to a combination of increasing demand for space and a restricted supply following the downturn.”
Although the retail sector’s performance has so far been stronger than expected, CBRE cautioned that it still expects retail sector prospects to weaken as consumers continue to tighten their belts. “Regional divergence, as seen in the current office markets, is also expected to occur, with prime locations expected to fare much better than centres with weaker occupier demand,” it added.