February displayed typical characteristics of the early part of the year, as rental value growth for all UK property moved to 0.2% from 0.1% in January, according to the latest CBRE Monthly Index. This is identical to February 2015, and up on 2014’s figure of 0.1%.
Total returns also rose from 0.6% in January to 0.7% in February, whilst initial yields stayed flat at 4.8%, down from 5.2% for the same period last year.
Central London office performance, with rental value growth of 0.6% (up from 0.4% in January), was the key driver in the UK office market as a whole, which recorded 0.4% growth overall. Capital value growth also rose from 0.4% in January to 0.6% in the same sector last month. However, after a strong January, the Outer London/M25 office market fell from 0.7% to 0.2% from a rental value growth perspective, while capital value growth also fell from 0.7% to 0.5%.
The retail sector had a challenging start to the year by contrast, with rental value growth of 0% for both January and February, and capital value growth flat at just 0.1%.
Miles Gibson, Head of UK Research at CBRE said: “There has been much discussion of the potential for upward yield movement in recent weeks, but our data shows that yields are flat at present, and in fact down on the same period last year.
“Central London offices continue to deliver good returns for investors, but the retail sector is flat despite increased consumer disposable income driving retail sales up.
“January and February are a typically slower part of the year for the property market, so these numbers are in line with our expectations.”