A new report published by Savills has noted that investors consider the UK property market - and London in particular - to be a "safe haven" in times of economic uncertainty. In its September Market in Minutes brief, the firm revealed that investor confidence in London real estate has resulted in "steady yield levels" coupled with an increasing amount of investment being ploughed into the city's property markets.
However, the organisation added that there has been "rising investor caution" relating to assets elsewhere in the country due to worries over the speed and level of the UK's economic recovery. Savills has therefore predicted a softening of secondary and tertiary yields over the final months of 2011. Across all the prime commercial property sectors, yields remained broadly the same between July and August, while marginal changes were recorded in a few areas year-on-year.
When the researchers looked at rental growth over the past three months, they found that it is not only London locations that are seeing prices rise - and highlighted retail warehouses as one area in particular where growth has occurred, largely due to reduced vacancy rates at the most sought-after locations. London city offices recorded the greatest increases though, followed by standard shops in the city's central districts and West End offices.
In the Savills European Investment Bulletin published earlier this month, Eri Mitsostergiou - who works in the European research department at the firm, commented that "prime yields are back to their long-term average levels, following a period of strong investor interest for prime assets". Across the continent as a whole, yields for shopping centres and warehouses in the most desirable locations showed little change between the first and second quarters of this year, while there was a compression of around 15 basis points among yields for offices in central business districts. The report also noted that investment volumes during the first half of 2011 were around eight per cent higher than those witnessed a year earlier. The UK remains one of the most active markets, along with Germany, Sweden, France and the Netherlands.
- Monday 12 September 2011