Central London offices continue to outperform rest of the UK

CB Richard Ellis Monthly Index notes continued uneven recovery for UK property sectors

Article posted: 09 Jun 2011

According to CBRE’s May UK Monthly Index, commercial property in the UK secured another month of positive capital growth, albeit muted at 0.2%, delivering total returns of 0.7%. This is a slight improvement on the April return figure of 0.6%, where growth was affected by softer investor activity. Again it was the office sector that saw the greatest divergence of performance, with office space in Central London continuing to outperform all other sectors with values up by 0.6%, whilst outside of London offices in the UK suffered a fall of 0.5%.

All Property rental values came down by 0.1% in May, with only office space in the City of London and office space in the West End seeing positive rental growth in May.

Nick Parker, Senior Analyst, CB Richard Ellis, said: “The City office market has emerged as the clear leader for UK commercial property so far this year, with capital growth of 5.6% in the first 5 months, and 42.4% since the trough in the market in mid-2009. What investors are increasingly finding attractive about offices in Central London is not just the income security afforded by large occupiers, but also that rents are enjoying significant uplift due to a combination of increasing demand for space and a restricted supply following the downturn.

“The weakness anticipated across the retail sectors has so far failed to materialize, with a slow improvement confounding many analysts’ expectations, with values up by 1.5%. As consumers continue to feel the pinch from falling real wages and from government cutbacks, retail sector prospects are expected to weaken. Regional divergence, as seen in the current office markets, is also expected to occur, with prime locations expected to fare much better than centres with weaker occupier demand.”

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Posted by Sara