UK Commercial Rents Still Falling Says IPD

Commercial property rents in the UK have now fallen for the entire second quarter according to the latest data from IPD. The firm's latest report says commercial property rents across all sectors...

Commercial property rents in the UK have now fallen for the entire second quarter according to the latest data from IPD. The firm's latest report says commercial property rents across all sectors and locations fell by 0.1% in August, leaving them down for the 0.2% for the three months ending August. Between May 2008 and August 2010 they fell by 11.0% at the all property level, and since then have largely stagnated. They remain over 11% below their peak.

That said: according to the firm there is huge disparity across the UK, particularly when it comes to London, which has seen office rents grow 0.4% in August alone. Outside the capital rents have been falling for longer than 3 months.

In Wales retail rents have fallen 5.6% in the past year, and in Yorkshire and Humberside the decline has been almost as bad at 4.8%.

According to the report, the decline in rents combined with yield expansion to bring about a 0.3% fall in capital values in August. However, an income return of 0.6% for the month helped offset the negatives and left the total return at 0.2%.

Phil Tily, IPD managing director for IPD UK and Ireland, said: "Heavy declines in rental values outside of London will lead to further doubts about the sustainability of UK regional assets.

"Though interest remains for heavily discounted assets in the UK's regions, with income yields sometimes in excess of 8%, without tenant and income security they remain a risky prospect for investors.

"Until occupier demand starts to stabilise outside of London, which will inevitably be reliant on the UK coming back out of recession, and a degree of consumer confidence returning to the market, it is going to be difficult to sustain the high initial income over the long term"

- Tuesday 18 September 2012

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