Monthly commercial property total returns rose to 0.9% in August,
their highest since March 2011, as improvements in the wider economy continued
to filter down
into real estate performance. According to the
IPD UK Monthly Index,
produces by IPD London, returns were boosted by a 0.4% rise in
which have grown by a cumulative 0.8% over the four straight months since May.
at 0.6%, have remained steady over the same period.
Comparatively, bonds and equities delivered -1.6% and -2.4% in August (JP UK
Morgan 7-10 Year,
All three main sectors saw rising total returns off the back of capital
growth, but critically the
retail sector saw growth for the first time since October 2011.
Retail property values rose by 0.1% in the month, and though slight, this
halts a 21-month
cumulative decline of 7.1% and led to a total return of 0.7%. Critically, growth
was not just
restricted to London, with shops and retail warehouses around the UK seeing
stable or growing
property values. However, shopping centres continued to see falling values.
Regional assets in the office and industrial sectors also saw rising returns
as growth and improving
sentiment filtered out of London and the South East.
Offices returned 1.1% overall as capital values grew by 0.6%, and saw rising
total returns and
values in all but two of the eight regional segments measured.
Returns in the industrial sector were their highest in over three years, at
1.2%, driven in equal
measure by strong capital growth of 0.6%, and an income return of 0.6% by assets
Rental growth was more uneven around the UK. For all UK property, rents rose
by 0.1%, driven by
a rise of 0.3% for offices and 0.1% for industrial units. However, in the retail
continued to be a decline of 0.1% and demand in local regional occupier markets
Phil Tily, executive director & head of UK and Ireland, IPD, said, “This time
last year, values were
falling by 0.3% and the economy looked ready to slip back into recession.
However, in twelve
months we have seen economic growth returning (if indeed it ever left), consumer
confidence rising, and a raft of improvements in other economic indicators.
“As this growth moves further out of London, income and value add
opportunities in the regions,
where income yields often exceed 8%, will start to attract investors willing to
move up the risk
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