Mind the gap
Total property returns reached 1.3% in Q3 2012, according to the Jones Lang LaSalle property index, compared with 0.4% for Q2. Although this was the biggest quarterly increase since Q4 2011, annual returns for 2012 so far are still significantly below previous years, at 3.8% compared with 8.4% at the same time in 2011, the firm notes. Jones Lang LaSalle adds that, given the divide in performance between sectors, and between prime and secondary markets, “careful stock selection will remain a priority for investors”.
The firm’s ‘style index’ indicates a continued gap between the investment performance of prime (growth) and secondary (value) assets. Annual returns in Q3 2012 were 6.4% for growth and 0.8% for value properties. “There is a clear divide between prime and secondary and while the prime sector should remain resilient, prospects remain highly polarised and other segments of the markets will continue to struggle,” the firm says.
Retail property recorded the strongest returns at sector level in Q3, at 1.3%, with properties in prime locations and retail warehousing making the largest contributions to growth. Returns for office space came in at 1.2% and for industrial properties the figure was 1.0%.
Capital value growth remained negative at -2.9% on an annual basis, as it continued to decline for the fourth quarter in a row. However, JLL notes that the -0.5% reading for the third quarter was a smaller decline than the -1.3% seen in Q2.
All Property rental growth remained limited at 0.4% for the quarter. While retail saw some improvement, the offices sector continued to contribute the most to this figure, JLL says.
