April property markets show some improvement – CBRE
There was some improvement in the performance of the UK’s commercial property markets in April, says CBRE, with the firm’s UK Monthly Index showing that a marginal increase in headline total returns and a slowdown in capital value declines enabled All Property total returns to increase to 0.2% from 0.1% in March. Capital values were down 0.3% in April, taking the year-to-date fall to 1.3% while total returns for the year to date are 0.7% overall.
Central London offices again boosted the overall figures, with capital growth at +0.1%, driven largely by the markets for office space in the West End and Midtown offices. “This is in no small part down to the strength of occupier markets in the capital, which saw bumper rental growth of 0.7% this month, helping to offset softening yields in some other sub-sectors,” the firm added. The overall office sector recorded total returns of 0.2% in April, to take the year-to-date figure to 1.0%.
Total returns in the retail sector were flat (compared with a 0.1% fall in March) as growing income offset declines in capital value. Retail warehousing helped the final figure, recording a positive total return of 0.2% and reduced capital declines, CBRE noted. So far this year, total retail returns are just 0.1%.
The market for industrial property was the strongest sector, recording total returns of 0.4% despite a marginal decline in capital values. Income in this sector was described as “healthy”. Year-to-date total returns for industrial property have now reached 1.5%.
Nick Parker, senior analyst of economics & forecasting at CBRE, said: “With the Olympics and Jubilee celebrations fast approaching, it is widely expected that traditional purchasers of UK property may well take a longer than usual summer break and resume activity in the third quarter, when they will also expect to have greater clarity on the economic outlook, particularly with the UK now in a technical recession.”
But following this hiatus, he thinks that the third quarter “could spell the turning point of this current weak period, with yields flattening out and economic traction starting to feed through into more stable occupier markets.”
