Jones Lang LaSalle UK Property Index highlights divide between prime and secondary
Jones Lang LaSalle’s UK Property Index for the third quarter shows total returns of 1.3% compared with 0.4% in the previous quarter. The firm notes this is the largest quarterly increase since Q4 2011, but points out that annual returns for 2012 so far are still well below previous years, at 3.8% compared with 8.4% at this point in 2011.
Capital value growth remained negative on an annual basis in Q3, at -2.9%, having declined for the fourth quarter in a row. For the third quarter, capital values fell 0.5%, which represents a slowdown in the rate of decline compared with the 1.3% reduction seen in Q2. Income return offset declines in capital values, Jones Lang LaSalle notes.
Retail was the strongest sector in the quarter, with returns of 1.3%. JLL says properties in prime locations and retail warehouses produced the largest contributions to growth. Returns for the offices sector were 1.2% and for industrial property the figure was 1.0%.
Rental growth at the all-property level remained limited in Q3, at 0.4%, JLL reports. “Whilst retail saw some improvement it is offices that continue to contribute most to this figure,” the firm adds.
JLL’s “style index”, which analyses the performance of prime (growth) versus secondary (value) investment styles, shows the continued discrepancy in investment performance between the two. Third-quarter annual returns for growth properties were 6.4% while for value properties they were negative 0.8%, as UK secondary property continued to see the sharpest capital declines. “There is a clear divide between prime and secondary and while the prime sector should remain resilient, prospects remain highly polarized and other segments of the markets will continue to struggle,” JLL adds.
