UK Commercial Property Market Shows Stable Recovery

On Monday, December 14th, IPD published a report, which suggests that this November UK commercial property values hit the 15-years high.
IPD UK Monthly Index showed that capital growth amounted to 2.4% in November, thus bringing overall growth for the past 1,5 years to 5,4%, while year-on-year capital growth reached -8.4%.
Such significant changes on the UK commercial property market can be explained by reduced pressure on rents and growing yield compression. Rent increases, although they stayed in the negative territory, finally improved to -0.3% in November, up from the 22-years low of -1.3% registered in March. Meanwhile, yield compression, which has been present for 5 months in a row, resulted in November yields standing at 7.3%.  Concurrently, five consecutive months of yield compression has seen all property yields end November at 7.3%.
IPD UK Monthly Index also showed that capital growth varied greatly from sector to sector. As such, capital growth in retail amounted to 2.8% in November, while in the industrial sector the figures reached 2.1%. Both figures represent historic highs, which were only surpassed in December 1993 and March 1994 accordingly.
Commenting on the results of the IPD UK Monthly Index , Mr. Hunt, IPD’s Head of UK Client Services, said that the positive changes on the UK commercial property market that occurred in the past 4 months might result in a positive annual return for 2009.  He reminded that in December 2008 the sector of commercial property in Great Britain barely surpassed the worst annual result, seen in 1990. Such a rapid improvement was not even considered achievable last year.
He warned, however, that the uncertainty of markets should prevent market players from being too optimistic. Mr. Hunt reminded that the recent events in the Middle East show the fragility of market confidence and high probability of property risk.