UK commercial property total returns improved in October, by a modest 0.4%, following September’s 0.2% return, the latest index from CBRE shows.

All Property capital values also showed some improvement, with the decline slowing to just 0.1% compared to September’s fall of 0.3%, it also shows.

At 1.3%, it was once again Central London offices that showed the strongest returns in the month, reflecting capital value growth of 0.9%, and an overall year to date total return of 6.2%. As in previous months, the contrast to offices in the rest of the UK was obvious. Year to date total returns for this sub-market were down 4.4%, while capital values have fallen 9.6% since the start of the year.

The gains seen in Outer London/M25 offices in September, the first in 18 months, were neutralized in October by an equivalent decline of 0.1%.

Following the publication of the British Retail Consortium’s October retail sales figures, which reported further declines and the lowest sales for 11 months, excluding Easter, it is no surprise that retail property continues to come under pressure.

Total returns in October for Retail property were 0.1% and the decline in capital values stayed at -0.3% for the second month in a row. Year to date values for Retail are down 4.6%.

‘The disparity between performance in the Central London offices sub-market and the rest of UK offices sub-markets is once again prevalent. As Central London continues to witness modest growth in values and positive returns each month the opposite is true for the rest of the UK,’ said Leslie Schroeder, senior analyst at CBRE.

‘Investors maintain a cautious approach for anything but the best stock. However, at some point the substantial pricing differential between London and the rest of the UK will undoubtedly start to attract investors,’ she added.
The index also shows that all Property capital values declined by a marginal 0.1% while total returns reached 0.4%. In the three months to the end of October, annualised All Property total returns were 2.9%.

Declines in capital values affected all sub-sectors except All Offices, which showed an increase of 0.9%, though this was entirely down to the strength of the Central London market.

The Rest of UK Offices were the worst performing sub-market with values falling by 1.1% in October and total returns down 0.5%.

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