The UK's commercial real estate market is being supported by the returns generated by investment properties in London. According to figures published by IPD, capital values for retail, industrial and office assets declined by 0.3 per cent across Great Britain last month. By contrast, these three sectors in London were the only ones to record positive growth in the same period. Managing director of IPD UK and Ireland Phil Tily stated: "Without the impact of London on returns, which remains the powerhouse of the UK property market, the declines across the UK would be even more apparent."
His assertion appears to be backed up by data released by CB Richard Ellis (CBRE) earlier this month, which also highlighted the strength of London's commercial real estate sector compared to the rest of the country. However, the CBRE figures found that, overall, returns for all UK property were in positive territory at 0.2 per cent. The organisation pointed to central London offices as one of the most robust sectors, noting rental growth of 0.7 per cent in April helped boost the performance of this asset class. Senior analyst of economics and forecasting at CBRE Nick Parker commented: "London remains a clear focal point for active investors, with GBP 3.7 billion exchanged in the first quarter, driving continued competition and positive capital growth in April."
Mr Tily expects London's buoyant performance to help enhance the appeal of UK commercial property investment. "Confidence in the capital, and its ability to keep growing, should lend some assurance to the industry," he asserted. This is despite some concerns pricing, particularly in the City office market, is not sustainable, he added. Another factor working in the UK's favour is the ongoing debt crisis in the eurozone, which may push more investors towards London and other property markets in the country. Mr Tily noted the nation's capital has a reputation as a safe haven, which may become more important if uncertainty takes hold elsewhere. He also stressed that even though the value of commercial real estate has declined, income returns have been stable at 0.5 per cent.
- Thursday 17 May 2012