commercial property lambert smith hampton

Research - 28/04/2014

Yield and void matrix Q1 2014

Our Valuation and Capital Markets experts have recorded the yields and voids across all major asset classes for Q1 2014.

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This matrix provides detailed analysis of yield profiles across the market – ensuring you can make an informed decision about your investment activity.

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In Q1 2014, UK institutions were the largest net investors into the commercial property market, overtaking overseas buyers for the first time since the third quarter of 2011. Net overseas investment dropped to £1.2bn in Q1 2014, from £2.4bn in the corresponding period last year, on the back of an increase in asset sales.

Transactional yields at lowest level since 2008

Transaction yields for commercial property have fallen once again and are now at their lowest level since the middle of 2008. The recovery in values has led to profit taking in some sectors, but investors seem to be holding assets for longer than in previous upswings, particularly in London, so we may reach a point where activity will start to slow as a result of a lack of available stock.

Central London offices remain the epicentre of the UK commercial property market, although there was a substantial decrease in quarterly investment levels. The total transaction volume was £2.71bn, a 65% drop compared to the £7.48bn transacted in Q4. The fall in investment is partly the due to the absence of two exceptional deals – More London (£1.7bn) and Broadgate Estate (£1.7bn) – that provided a major boost to the Q4 figures.

UK offices saw a drop in investment levels

The decrease in investment extended to the regional office markets and both South East and Rest of the UK offices saw a drop in investment levels. However, it is interesting that weighted average yields for Rest of UK offices dipped below 7% for the first time since the end of the financial crisis.

Industrial sector has outperformed

Industrial as a sector has outperformed in the last 12 to 18 months. While investment volumes remain below those recorded in the office and retail sectors, demand for the available stock has pushed down yields and driven up returns in to double digits. This quarter, our industrial transaction yield has fallen to 6.98%, which is the first time it has dropped below 7% since Q4 2008. 


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