The latest data from Investment Property Databank (better known as IPD) reflects very positively indeed on the UK commercial property sector, with growth across the retail, office and industrial sectors showing that confidence may finally be returning to the sector.
According to the data capital values for commercial property grew for the third consecutive month, with values up 0.2 percent in July. IPD predicts continued positivity in the commercial property sector due to the recent Bank of England announcement that it intends to keep interest rates low as long as unemployment unless unemployment numbers improve.
"Governor Mark Carney's recent announcement regarding the Bank of England's future monetary policy should continue to encourage investors in and towards commercial real estate," Phil Tily, executive director & head of UK and Ireland, IPD, said in the report. "Unless the U.K. meets any of his 'targets,' then interest rates and bond yields are going to remain low, and that means investors will continue to look for good value add and income opportunities in the real estate sector."
The rest of the IPD data showed that total returns for commercial property in July came in at 0.8 percent, with little difference across the sectors as offices and industrial both came in at 1 percent while retail was 0.5 percent.
According to the firm the retail sector is suffering from the effects of negative capital movements, but it did report recovery in regional markets. Stores across the South East, Midlands and South West registered higher returns as declines in capital values eased or halted, the firm reported.
The one negative contained in the report is the lack of growth in rental rates in the UK commercial sector. According to the report rental rates were unchanged in July as compared to June at 0.0 percent, as demand continues to slow for Central London offices. The report shows a 70 basis point fall in London rental growth, which fell to 0.1 percent.
- Tuesday 20 August 2013