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Commercial Property Values Increase

UK Commercial Property Values Increase

Property values for stores, offices and warehouses in the U.K. increased in July as confidence returned to the commercial sector.

Capital values for commercial property increased by 0.2 percent, representing three consecutive months of growth, according to the latest report from Investment Property Databank.

The firm expects continued investor interest for the commercial sector on the heels of Bank of England’s announcement of maintained low interest rates unless unemployment numbers improve.

"Governor Mark Carney’s recent announcement regarding the Bank of England’s future monetary policy should continue to encourage investors in and towards commercial real estate."

Phil Tily, executive director & head of UK and Ireland, IPD, said in the report. "Unless the U.K. meets any of his ‘targets,’ then interest rates and bond yields are going to remain low, and that means investors will continue to look for good value add and income opportunities in the real estate sector."

Total return was 0.8 percent with the three main sectors showing stability; offices returned 1.0 percent, industrial 1.0 percent and retail 0.5 percent, London-based IPD reported.

The U.K. retail sector is struggling with negative capital movements, but it did report recovery in regional markets. Stores across the South East, Midlands and South West registered higher returns as declines in capital values eased or halted, the firm reported.

Although property values are increasing, rental rates for commercial property in the U.K. was unchanged in June to 0.0 percent in July, driven by slowing demand for Central London offices. Rental growth in the city fell 70 basis points to 0.1 percent.

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