UK Commercial Property Returns ''Broadly Flat''

The level of return generated by commercial real estate investments in the UK remained flat in August, according to the latest research...

The level of return generated by commercial real estate investments in the UK remained flat in August, according to the latest research published by CBRE. The firm recorded returns of 0.2 per cent for UK commercial property as a whole, while the value of such assets declined by 0.3 per cent last month. However, central London continued to buoy the figures, with the organisation noting investors' focus on prime real estate has resulted in the capital outperforming other regions in the country.

Senior analyst of economics and forecasting at CBRE Nick Park explained investors are increasingly looking for alternative asset classes that can offer a better rate of return than standard commercial real estate. He stated that these properties can be as diverse as a gym or car showroom, with all these unusual premises being grouped under other property. "Alternative sectors have continued to do relatively well throughout 2012. Some of the assets that fit into other property offer more annuity-style secure income streams for investors, which is ultimately what investors have been targeting since capital values stuttered last year," he asserted.

Mr Park added that, while it is difficult to benchmark these assets against other commercial property sectors, there are clear signs that these alternatives have outperformed their more mainstream counterparts. Offices are still the strongest asset class, while retail remains "subdued", according to CBRE. Research published by Knight Frank earlier this month suggested the UK's retail sector will continue to be "highly polarised", with properties in prime locations - particularly London and the south-east - the main targets for investors.

Development activity in the retail industry is still constrained, with no significant uplift in supply anticipated before 2015. However, head of retail development at the firm Ian Barbour observed that there has been an increase in the level of activity within the sector in some of the UK's stronger towns and cities.

- Tuesday 11 September 2012

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