Commercial Property Returns Rise to its Highest
UK commercial property left an unexpected strong note by the end of 2009 with the record of its largest monthly increase in the index history.
According to CBRE (CB Richard Ellis) Monthly Index, commercial property in the UK revealed 3.9% total return in December – with 4% returns throughout the whole year of 2009. This is a huge turnaround from the negative expectations held during the first half of 2009. The capital value of all property rose by 3.3% in December, leading to the biggest monthly growth in nine years.
Retail warehouse has preformed the strongest within the commercial property sector mainly due to the intense investment demand – with 6.1% growth in capital values in December. This contributed to a total of 6.5% up over the past year. Central London offices, in particular, were up by 3.7% in December, resulting 2.1% down compared to the same period last year.
However, with the returns and values going up within the commercial property sector, the rental prices has gone down in value by 0.3% in December 2009, leading to 8.9% yearly drop. The rental prices in Central London have decreased by 21.5% throughout 2009.
CBRE head of UK research, Peter Damesick, stated that, “the sharply accelerating returns and value increases seen over the past few months inversely mirror the worst of the downturn seen this time last year…strong demand from overseas investors and renewed flows of money into UK property funds have been the key drivers of growth, with limited availability of good quality assets to buy. Increased capital flows into property look likely in the near term, giving further momentum to the market in the early part of 2010.”
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