Slight slowdown for UK property in August lull – CBRE
Returns from retail property weakened during August, coming in at 0.4% for the month according to CBRE’s Monthly Index, with high street shop values falling as investor concern grew about the outlook for the consumer sector and retail rents. Capital values for the retail sector were unchanged month-on-month. Office returns meanwhile stayed firm at 0.7% with capital growth of 0.2%, and industrial returns strengthened to 0.6% with capital values up 0.1%. The overall total return for August was 0.5% compared with 0.6% for July.
All three sectors have seen returns slow considerably since the first quarter of the year, CBRE notes, with the outperformance of Central London offices – still the strongest subsector, with August total returns of 0.8% – slowing dramatically in recent months amid fears over the economic recovery. Rental growth again helped to boost capital values for this subsector, but this was also muted at growth of just 0.2%. The performance of office space in the Outer London/M25 market improved, with capital growth of 0.1% after a 0.1% fall in July, and total returns of 0.7%. But elsewhere in the UK, capital values for offices fell 0.1%, with total returns at 0.4%.
Within retail, high-street shops remained weak with values falling for the second month in a row, down 0.2% in August after falling 0.1% in July. Shopping centres saw zero capital growth and returns of 0.5% for August while retail warehouses continued to grow in value, rising 0.1%, with total returns of 0.5%.
CBRE says August was a quiet month for investment in UK commercial property, as expected given the holiday season, with just over £1.5bn of property purchased compared with £2.7bn during the same month in 2010. Year-to-date investment is £20.3bn, slightly below the total at this time last year.
