"Healthy Returns" Recorded for UK Commercial Property

Those with commercial property investments in the UK have experienced "relatively healthy" returns during 2011, it has been asserted...

Those with commercial property investments in the UK have experienced "relatively healthy" returns during 2011, it has been asserted. According to the CB Richard Ellis (CBRE) Monthly Index for December, the annual return on such an investment last year stood at 8.1 per cent. However, the firm stressed there is a disparity between the income generated by different asset classes, with properties in the central London office and retail warehouse sectors among those to do well, while offices in the outer London/M25 area or the rest of the UK underperformed.

Head of economics and forecasting at CBRE David Wylie described the figures for the commercial real estate market as a whole as a "respectable performance given the broader economic background". He noted returns were predominantly generated by income, rather than capital growth, which reached 1.9 per cent at the end of 2011. "Performance across different parts of the market, and more importantly across different grades of property, was very skewed in 2011, with strength in central London offices and prime assets in particular helping to offset weakness elsewhere," Mr Wylie stated.

The office market was the most buoyant sector last year, the CBRE data showed, posting a return of 9.1 per cent. Properties in central London generated 12.7 per cent, while those elsewhere in the UK were much lower. The rest of UK category saw annual returns of just 3.3 per cent, while premises in outer London/M25 area achieved a return of 4.8 per cent. In terms of the price of rents, the office sector was the only one to experience growth, with retail and industrial properties both posting declining rental values.

Earlier this month, partner in the commercial research team at Knight Frank Darren Yates commented that uncertainty among investors about the outcome of the eurozone debt crisis has held back investment volumes in the UK's commercial real estate sector over the past few months. He predicted a solution to the problems faced by European governments would encourage more investors to enter the marketplace and boost the country's commercial property industry.

- Friday 13 January 2012

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