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Commercial property yields climb in 1H19 – Savills

Property specialist Savills’ latest Market in Minutes report has indicated that the UK’s average all-property yield has reached its highest level since November 2016 at 4.90 per cent.

Yields rose a quarter point across retail warehousing and leisure assets through July 2019.

The report also revealed that while investors are becoming increasingly active studiers of the UK market, particularly of the retail sector, transactional volumes remain low as they are largely waiting to strike at the ‘right’ price, although investment volumes in high street shops did tick up by 9 per cent in H1 2019 compared to H1 2018.

The main exception to the upwards trend of the last 12 months is the City of London office market, where prime yields hardened from 4.25 per cent in June to 4.00 per cent in July, supported by the sale of 8 Finsbury Circus, EC2M, to Singapore-based Stamford Land for £260 million.

Mat Oakley, head of UK and European commercial research at Savills, said: “The depth of interest and the prices we’re seeing being achieved on prime London assets indicates that there is a still a significant depth of demand for high quality commercial property. With these assets also continuing to deliver positive capital value growth, any further weakening of sterling in the second half of 2019 is likely to see additional demand unleashed and rising volumes. 

“There are also investors circling ready to buy distressed retail assets although the prices they’re willing to pay will have to be commensurate to the risks involved.”

Belfast top city for office investors

The Belfast office market is performing better for investors than the likes of Manchester, Liverpool, Glasgow, Cardiff and London. 

A report produced by Ulster University and MSCI in collaboration with RICS commercial property firms, entitled The Northern Ireland Commercial Property Investment Review, benchmarked the Northern Ireland and Belfast market against UK and European markets. 

The report claims that commercial property in Northern Ireland posted a total return of 1.7 per cent in 2018, down eight per cent the year before, but points out that the income return of seven per cent for NI exceeded that recorded for other UK nations in 2018, with NI continuing to perform, with the Belfast office market seeing returns of 12.4 per cent, well above the UK average of six per cent and European average of eight per cent.

RICS Regional Manager, Susan Mason, said: “This is the only independent analysis of the Northern Ireland commercial property sector that benchmarks it against other regions and cities, so it is an extremely valuable report that will be of significant use to surveyors, investors, and others in the property sector.”