UK commercial property has shown first capital growth in 26 months - - climbing 0.2% in August, according to the IPD UK Monthly Index. Meanwhile a German fund has invested in Dublin's Grafton Street but no price details were given on the deal.
A continued easing in negative rental value growth, which improved by 10 basis points to -0.48% over August, together with a second-consecutive positive yield impact, at +0.64%, combined to bring the UK commercial property market back to positive growth for the first time since June 2007. The consecutive 25-month peak-to-trough capital decline ended at -44.2%, this compares with the 43-month nominal decline of -27.1% between October 1989 and May 1993.
Over the 12 months to the end of August 2009, covering the bulk of the period since Lehman Brothers’ collapse, bonds have been the most resilient asset class, returning 13.3%, as measured by the FT Gilts 5 – 15 Years Index. Over the same period equity markets have delivered a -8.2% total return, according to the FTSE All Share Index, while commercial property is still reporting a -22.6% 12-month return.
German Fund
CBRE, the commercial property agents, said on Monday that German fund Deka Immobilien GmbH has finalised the purchase of "an attractive retail asset for its special fund in Ireland." The vendor is Marks & Spencer, Ireland. The property, which extends to 800 square metres, is let to Tommy Hilfiger on a long term lease. The building was renovated in 2008 and is located in one of Europe’s most frequented pedestrian streets.
CBRE says the sale is significant in that it is the first acquisition in the Irish market by an overseas fund in a market that has heretofore been dominated by local purchasers.
No price details were issued.
Global markets
Jones Lang LaSalle says in a new report that commercial property in some global markets is showing early signs of recovery.
JLL says yields have begun to compress, the number and size of institutional investment transactions are increasing, bargain-hunting investors are beginning to do deals, and cost-conscious corporations who are keen to seize rental opportunities are now beginning to move.
Commenting on the publication of ‘Global Market Perspective’, John Moran, Managing Director, Jones Lang LaSalle (Ireland) said that while property demand fundamentals remain weak and the commercial property sector’s problems are far from over, concrete evidence that the global economy is on the path to recovery has been building since March of this year. As this uneven journey progresses across the world, astute investors and corporate occupiers who begin to assess, and eventually exploit, near-term opportunities will be best positioned to benefit from long-term improvements.
In Europe, transaction activity rose marginally in the second quarter, in stark contrast with average rate drops of 22% a quarter in each of the previous seven quarters. France recorded the largest increase in quarterly volumes, almost doubling investment activity. Other major European markets that enjoyed an increase in second-quarter trading volumes were Germany, Italy, the Netherlands, Spain and Sweden.
