August’s UK commercial property performance mirrored that of July’s with total returns of 0.2%, and values falling by 0.3%. Year to date, capital values are down 2.9% with total returns at 0.9%. Central London remains the key performer, with values still growing whereas elsewhere values continue to fall, according to CBRE’s latest Monthly Index.
The continued outperformance from the Central London office market, where values have risen by 1.2% so far this year, is due to the focus of investors on prime assets. This has helped stabilise All Office capital values UK wide, which are down just 1.7% over 2012. Outside of London, the picture for the retail sector remains subdued, with weaker occupier demand softening values, down 0.4% this month, and by 4.1% so far this year.
In line with investors’ focus on more diverse and secure incomes, ‘All Other’ property has done relatively well this year, with values down just 0.9%. This category contains assets that do not fit the three traditional sector profiles, and comprise ‘alternative’ investment asset classes.
Nick Parker, Senior Analyst of Economics & Forecasting at CBRE, said: “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. ‘Alternative’ assets vary wildly in shape and form, from car showrooms, gyms and cinemas all the way to hi-tech datacenters, very much a growing sector given today’s need for server space and capacity
“The diverse nature of the sector means that it is difficult to benchmark it versus others, but they have certainly outperformed all other asset classes in the year to date, with values only marginally down.”
CBRE UK Monthly Index snapshot – August 2012:
- All Property total returns were 0.2% in August, with capital values down 0.3%.
- Year to date, capital values have fallen by 2.9%.
- Central London offices remain the strongest sub-sector, with values up by 0.2% over the month, with total returns of 0.5%.
- Retail performance remains subdued, with total returns of 0.1%, as shopping centres continue to underperform, with total returns negative over the month.
- Industrial property saw values fall by 0.4% in August, down by 1.9% so far this year.
- Rental values fell by 0.1% this month, as further concerns over the economic outlook caused occupier markets to weaken.