Sustained rental growth based on continued occupier confidence, despite concerns about the Brexit process, should see a strong performance in commercial property investments to the end of year and well beyond, according to a leading commercial property asset management specialist.
Tim Matthews, Chief Executive of Birmingham-based Blue Marble Asset Management (Blue Marble), says that all commercial property sectors continue to perform well, although in the longer term the expected increase in interest rates may in turn put upwards pressure on yields as returns on risk free investments improve.
According to recent reports, capital values increased 0.4% on average across UK commercial property in August 2017 with rental growth at 0.2% during the month, with the industrial sector still the strongest performer. However, encouragingly there was capital value growth in the retail sector of 0.3% in August (up from 0.2% in July), this being a sector which has languished behind the performance of the office and industrial sectors in recent years.
Mr Matthews says: “General sentiment from investors remains positive overall, although a handful of investment agents have recounted instances where demand for product has been lower than previously experienced and perhaps symptomatic of a potential softening of prices / yields. However, this may just be reflective of the lower investor activity during the Summer and a return to ‘normal’ levels of demand is likely throughout the Autumn.
“Yield compression is still a factor in pricing, although this is now relatively minor with rental growth being seen by investors as a more positive driver.
“In the longer term, with some commentators predicting that 10-year gilt yields will reach 1.5% by the end of the year, before rising to 2.5% by end-2018, there may be an increase in property yields as risk free money moves elsewhere, but that is not yet a major concern and Blue Marble continues to be active both acquiring and disposing of investments on behalf of its clients.”
Based in Birmingham, Blue Marble Asset Management is a real estate asset management specialist which presently has more than £70 million of property assets under management. It works for a select range of clients including investment businesses, high net worth individuals, trusts and family offices. Its business is based on taking a holistic view of each of its property investments.