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Growth steady for UK commercial properties

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After a stellar finish to 2014, the UK commercial property market is showing signs of more steady and stable growth according to the latest CBRE Monthly Index.

Average capital values for commercial properties increased by 0.5 per cent in February, which lead to a total return of just under 1 per cent. Rental value growth remained consistent across January and February at 0.2 per cent. 

According to a statement released by CBRE, this may be an indication that although returns from commercial properties will continue to be in double figures, they will be lower compared to last year.

This is not to say that there isn't a possibility of a dramatic turn around -  this year's results are eerily similar to how the market performed in January and February 2014.

The index also shows that the gap between the growth rate in capital value for prime and secondary property is getting narrower. Nonetheless the difference in terms of rental value growth is still quite high.

Only Central London offices saw positive growth in secondary capital value from 2009 to October 2013. Since then the capital value of secondary property has grown in all segments with the exception of offices outside the South East. 

After 2013 capital value of central London properties, whether primary or secondary property, have grown at a uniform rate. 

There is a particularly strong geographic divergence across the office sector. In Central London since October 2013. In the Outer London/M25 segment prime continues to outperform, but secondary capital values are also growing. The outer London/M25 segment primary capital values continue to do better than secondary, but the latter seem to be improving over time. 

According to Director of CBRE Andrew Marston the results indicate a stark difference of not only the geographical split, but also significant discrepancies between sectors.

"The performance of secondary office and industrial property for the Office and Industrial sectors is slowly catching up with the prime, a pattern that has not yet been seen for retail sub-sectors," he said. 

Date Published: 07 Apr 2015
Category: General NewsUK

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