UK Commercial Real Estate Values Fall 2% in 6 Months

Commercial real estate in the UK lost 2% of its value in the first half of 2012 according to the latest data from IPD, putting the performance down to the continued austerity measures imposed upon the UK...

Commercial real estate in the UK lost 2% of its value in the first half of 2012 according to the latest data from IPD, putting the performance down to the continued austerity measures imposed upon the UK as well as the continuation of the Euro madness.

According to the report the drop was caused almost entirely by falling capital values; while total returns remained positive at 0.1%, capital values fell by 0.5%.

Phil Tily, Managing Director of IPD UK and Ireland said, "It has been a difficult six months for the UK real estate industry, with the UK falling back into a mild recession, and values continuing to fall outside of the Capital. Unfortunately, for as long as the wider economic situation remains difficult, the property industry will have to wait a little longer before the recovery gets back under-way."

As if by some miracle, real estate outside London brought better yields than the capital did for the most part. Offices outside the south east have an average initial yield of 7.5 percent, whilst industrial units delivered 7.6% – a considerable premium on the 4.5% available in central London, or the 2.3% of UK gilts.

Tily continued: "There are still opportunities in the market, and property does still have a lot to offer investors – especially in comparison to the volatility of equities, and the low yields of gilts – and in a market of flat or negative growth, the income offered on property is its greatest asset.

"Heavily discounted assets can potentially offer significant income premiums to investors priced out of London – if they are prudent with their asset selection, and willing to invest heavily in active management."     

- Tuesday 17 July 2012

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