CBRE details how offices drove 2010 returns
Last year saw overall commercial property values rise 8.9%, says CB Richard Ellis, with total returns at 16.1%, boosted by a 27.3% jump in returns for Central London offices. In December values for the CBRE Monthly Index grew by 0.6%, with the overall return at 1.1%.
Office property was the strongest-performing sector again in December, with capital growth of 1.0% and total returns of 1.6%. Within this sector, Central London offices produced a return of 2.5% after a 1.4% return in November. Values in Central London have risen steadily throughout 2010, increasing 20.8% over the course of the year. Offices in general produced a total return of 19.5% for the year and capital growth of 12.3%.
In the retail sector, the overall return was 1.0% in December. Within this, warehouses and shopping centres produced returns of 1.1% in December while the return from shops was 0.6%. For the year, retail recorded a total return of 15.5% and capital growth of 8.6%.
Industrial property staged something of a recovery, with a total return of 0.8% after the 0.3% return seen in November. This remains the weakest performing sector, however – for 2010 the sector returned 11%.
David Wylie, Head of UK Economics & Forecasting at CBRE, said: “Overall, 2010 was a stronger year than many expected at the start, albeit one in which performance has faded as the year progressed. What has become increasingly evident has been the huge divergence in performance between commercial property sub-sectors. This can be broadly categorised by outperformance in Central London and weakness in the UK regions, although the divergence is also apparent between prime and secondary property in all segments. Income security and risk aversion have been the key differentiators of prime performance over 2010, with the appetite for secondary stock failing to see any meaningful recovery.”
All Property rental values were flat in December, with the year as a whole recording a fall of 1.2%. David Wylie noted: “Occupier market fundamentals also differed widely over the year, with a lack of new space and strengthening demand in the Central London office markets causing a significant upward swing in rental values, whilst most other occupier markets continued to struggle.”
