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| IPD UK Monthly Property Index |
Both the Irish and UK commercial property markets
have strengthened in the first quarter of 2014 with the latest JLL Irish
Property Index showing overall returns at 9.1% while
commercial property values in the UK rose by a further 1.0% in March, continuing
the steady growth seen during the first two months of 2014. According to
the IPD UK Monthly Property Index, values
have now risen by 6.8% over the last 10 months of consecutive growth, although
overall they still remain below their 2007 peak levels.
The Irish market index shows a year-on-year rise
in overall returns of 24.9% -- back to the boom year annual levels in 2005 and 2007.
Irish capital values rose for the fourth
consecutive quarter at 6.8% while offices posted growth of 7.8%, with retail at
6.7% and industrial at 2.4%.
Capital values are up 19% in the office sector
over the past 12 months.
UK market
Commercial property values in the UK rose by a
further 1.0% in March, continuing the steady growth seen during the first two
months of 2014.
According to the
IPD UK Monthly Property Index,
values have now risen by 6.8% over the last 10 months of consecutive growth,
although overall they still remain below their 2007 peak levels.
Real estate total returns for the month were 1.6%, boosted
by an income return of 0.5%. Comparatively, bonds returned 0.1% and equities
-2.7% (JP Morgan 7-10 yr/MSCI UK).
Strong returns for the industrial and office
sectors, at 2.2% and 1.9% respectively, were driven by further capital value
growth of 1.6% and 1.5%. For the slowly recovering retail sector, a total return
of 1.1%, the strongest since December, was aided by capital growth of 0.6%.
Rental performance remained positive but
muted, with commercial rents rising by an additional 0.1% in March, meaning a
modest 1.2% gain over the last twelve months.
Rental values have continued to struggle in the retail
sector, as lacklustre occupier demand and muted consumer confidence kept rents
flat last month. Retail rents have been in decline for over 70 consecutive
months since May 2008, leading to a cumulative decline of -12.6%. While
expanding businesses are again demanding space in offices and logistical parks,
demand remains far more muted for retail space, particular outside of key urban
centres.
Total returns for standard shops outside of the South East
rose to 1.0% in March, as values grew by 0.4%. Comparably, offices outside of
the South East returned 1.2%, driven by a capital growth of 0.5%.
Retail warehouses and shopping centres also saw an upswing
in March, with retail parks across the UK returning 1.2% in March, while
Shopping centres returned 0.9%, thanks to improved value growth of 0.3%.
Phil Tily, Executive Director & Head of UK and
Ireland, IPD, said: "The broader UK commercial real estate market continues
to show signs of recovery and growth, with March proving to be the strongest
month of 2014 so far.
"While rental values remain weak for the beleaguered retail sector
nationally, improving investor sentiment, added 0.6% to capital values in March
alone. Notably, the rate of capital growth for retail parks, distribution
warehousing and department stores more than doubled month-on-month."
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