UK commercial property values rose by 0.6% in September, the highest
monthly growth since April 2010, according to the
IPD UK Monthly Property Index.
Total returns for the month rose to 1.2%, with capital growth now the
principal component of
performance.
Comparatively, bonds and equities delivered 0.7% and 0.8%
respectively in
September (JP UK Morgan 7-10 Year, MSCI UK).
IPD, a London-ased producer of global property indices, said all three mains sectors saw growing capital values, which led to total
returns of 0.8% for retail,
1.4% for industrials, and 1.5% for offices. The most significant capital growth
was for UK offices,
which saw values rise by 1.0% in September alone, up from 0.6% in August. This
growth was
predominantly driven by the South East market, which has seen a significant
improvement in the
last six months as economic growth spills out of London.
The retail sector also continued to see improvements. Capital values rose for
the second
consecutive month by 0.3%, continuing the recovery that began in August after
almost two years
(21 months) of declines.
As growth has not been restricted to London, and as economic sentiment has
improved, so have
returns in the UK’s regional centres. In the retail sector, retail warehouses
and shopping centres
around the UK are seeing positive results under capital growth, while for
standard shops, only
three regions (from a total of 13) are still experiencing declining property
values: the North East,
Yorkshire and Wales.
Similarly, offices around the UK are now reporting an upturn in all regions,
except the South West,
while industrials are benefitting from growth in all market segments.
IPD said rental values also grew in September, though at a more subdued rate of 0.1%.
While office rents
increased by 0.5% overall, industrial levels were static, and the retail sector
saw declines of 0.1%.
Phil Tily, executive director & dead of UK and Ireland, IPD, said, “As the
property sector is back
into full swing after the summer, there are a number of reasons to be more
confident about the
market. An ongoing improvement in investor sentiment, prompting further yield
compression has
helped the market deliver a predominantly capital based return this month.
“While values may be improving, occupier demand and rental growth remains
relatively subdued.
Investors looking to property allocations to provide long-term income streams
and stability, still
have to work on an asset-by-asset basis, with opportunities for active
management and future
supply and demand carefully examined.”
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