Commercial property starts the year on a highMake Text Bigger
Commercial investors are celebrating average property values increasing by 8.9% and returns of 16.1% for 2010.
News is not so good for every investor as results varied from sector to sector with offices leading the way – especially in Central London – and industrial buildings lagging behind the rest of the market.
Over the year, offices were the strongest performer with capital growth of 12.3% and a return on investment of 19.5% – with offices in Central London showing a return of 27.3% and capital appreciation of 20.8%.
The figures come from the latest CB Richard Ellis (CBRE) monthly commercial property index for December 2010.
The year ended with commercial property showing an average price increase of 0.6% for the month with returns of 1.1%.
Performance improved in the retail sector, with warehouses, shops and shopping centres all perking up.
Central London pulls away from the rest of the market
But rental values were a low point as they were sluggish for December and down 1.2% for the year.
Office rents in Central London did show an increase due to a lack of new space hitting the market and continuing demand putting a premium on the price of offices coming to the market.
David Wylie of CBRE said: “2010 was a stronger year than many expected at the start, although performance has faded as the year progressed. What has become increasingly evident has been the huge divergence in performance between commercial property sub-sectors.
“This can be broadly categorised by outperformance in Central London and weakness in the UK regions, although the divergence is also apparent between prime and secondary property in all segments. Income security and risk aversion have been the key differentiators of prime performance over 2010, with the appetite for secondary stock failing to see any meaningful recovery.”
Meanwhile, in one of the few big deals to build new commercial accommodation, British Land is finalising a deal to build 60,000 square feet of new office space in a landmark development near Marble Arch. The £40 million development will also include shops, a restaurant and homes.
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