Property Times

UK : Rents and yields contribute positively - October 2013

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In September, both rents and yields impacted returns positively at the 12-month IPD All Property level.

All three major property sector rental growths have been trending upwards. Office is clearly outperforming, driven by central London but there is also an increased demand/supply balance in the UK regions.

Industrial IPD annual rental growth was positive in August and September for the first time since November 2008. Occupier sentiment is improving with the pickup in economic activity in manufacturing and export markets. Supply has been restricted since speculative development is also extremely limited.

Retail IPD annual rental growth continues to be negative, but has been trending upwards in recent months, driven by an improvement for shopping centres. Despite retail failures earlier in the year, there is a definite sense of increased retailer confidence, backed up by strong retail sales figures over the summer.

In September, All Property equivalent yields fell three basis points to 7.43%. Moreover, the spread between prime and secondary yields has been widening at a decreasing rate. This suggests that secondary yields are beginning to stabilise also.

We expect yield spreads to actually narrow from 2014, and therefore for IPD secondary to outperform prime. This is due to a sustained improvement expected in economic growth, and changes in the perception of secondary assets and investors’ level of risk aversion.

Source : DTZ (Groupe UGL)

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Mots-clés : DTZ