Business mortgage holders set to benefit from strong property returns

2 December 2013

Markets

CBRE has predicted that total commercial property investment returns could escalate into double figures for 2013 as a whole, a trend that is likely to benefit business mortgage holders.

The real estate consultancy released a report showing that returns continued to increase to 1.6 per cent in November, bringing the year-to-date figure to 9.3 per cent.

Capital values, meanwhile, increased by one per cent last month and have risen by 3.1 per cent so far this year.

If these trends continue at the same pace, total returns for 2013 will be 11 per cent and capital growth will exceed four per cent, according to CBRE.

The company’s latest monthly index also showed that capital values escalated across all of the main commercial property sectors in November.

Industrial sites provided the biggest monthly increase of 1.9 per cent, which is the most substantial boost in capital values for the market since December 2009.

This trend helped the industrial sector achieve the highest total return of 2.5 per cent, while offices delivered returns of 1.9 per cent and capital growth of 1.4 per cent.

Central London offices performed strongly in November thanks to sizeable contributions from the West End and City markets, while properties in the outer London/M25 area have also been faring well.

Reflecting on the latest data, CBRE research analyst Aleksandra Starczynska said: “A repeat of November’s performance would result in total returns of 11 per cent for the year, the highest annual result since 2010 and far in excess of the two per cent achieved last year.

“More importantly, performance is spreading across the country with all sectors and regions starting to benefit.”

The report also highlighted improvements for the retail sector in November, while a separate study from CBRE showed that the amount of new supermarket space in the UK development pipeline has overtaken the shopping centre market for the first time.