Yields are stabilising, but recovery some way off
Cushman & Wakefield’s January Business Briefing on the UK property investment market reports a drop of just 7bp in prime UK yields during January – this is the smallest monthly decline since May 2009. The briefing says that while last autumn’s sharp falls are not expected to re-occur, some sectors are still expected to see further declines during the first half of 2010.
This stabilisation in prices is a pause for breath, the report suggests, after a sharp rebound during a short space of time. Central London offices are still the brightest spot in the occupation market, and the reduced pipeline suggests further strong performance is likely in this sector.
Turning to retail, the report notes the better than expected Christmas trading period (it was published before this week’s disappointing January retail sales) but adds a cautionary note – the improved Christmas was set against a weak 2008 performance and the temporary lets seen as usual during the period mean that availability of retail space for sale and to let may now rise further in some areas.
David Hutchings, head of research at Cushman & Wakefield, noted that together with the pressure on rents in Central London there had been a “hardening of attitudes towards incentives” in a range of other areas. As a result, investors in commercial property to let are now more prepared to accept shorter leases, for example. But he also noted that investors “need to maintain a realistic perspective and be looking to price in a stabilisation in activity and prime rents, rather than an imminent recovery.”
