Growth in UK commercial property market slowing amid double dip concerns
The UK commercial property has recorded 12 consecutive months of growth although gains are now slowing, according to the latest index to be published.
Values rose 0.2% in July, following gains of 0.5% in June, the figures from Investment Property Databank show. It means commercial property capital values have gained 15.4% since August 2009.
‘The last time UK commercial property managed 12 consecutive months of capital growth was in the month the market peaked, in June 2007, when annual growth rate was 7.1%,’ said Mark Clacy-Jones, research manager at IPD.
But the slowing in indicative of the failure of the UK economy to grow as fast as some analysts had been expecting. The National Institute of Economics and Social Research said it expects UK economic growth to slow in coming months. It estimated July-quarter GDP growth to be 0.9% against the 1.1% rise in the June quarter.
But IPD said July’s 0.2% positive capital growth matched the figure that kick started the recovery in capital values at the end of last summer. However, there is concern among investors that the UK could end up back in recession.
The index also shows that there has been growth in all three sectors of commercial property with offices up 0.3%, retail up 0.2% and industrial up 0.2%. Since August 2009, offices values have gain a total of 13.8%, retail 10.8%, and industrial 18.6%.
‘For four consecutive months the pace of capital appreciation has attenuated, as yield compression remains fractional across the sectors. The rebound to date has delivered capital appreciation at more than twice the growth rate of the final 12 months of the last property bull run. That puts into context just how far markets have recovered despite the slower pace in recent months,’ said Clacy-Jones.
The income return on all types of commercial properties rose 0.6% in July, unchanged from the gains in June and May.
‘So, the property picture looks stagnant at the end of the summer, but this can change quickly as events over the latest cycle have proved,’ Clacy-Jones added.