Take-up in Central London in July 2014 was 1.19 million sq ft, a decrease of 15% on the previous month. Central London availability experienced a fall of 3% to 12.73 million sq ft in July, which is below the 10-year average of 16.21 million sq ft. Under offers in Central London fell by 15% over the course of the month, standing at 3.53 million sq ft, but remaining 30% above trend. The largest deal of July saw law firm Mishcon de Reya acquire 116,400 sq ft at Africa House, Kingsway, WC2.
MIDTOWN OFFICES STAND OUT IN JULY Capital values continued to increase in July, growing by 1.2% over the month. As a result, total returns were 1.7% for All Property, according to CBRE’s latest Monthly Index. Central London performed very well in July and recorded capital value growth of 1.1% over the month. In particular, offices in Midtown stood out, recording high total returns driven by significant capital value growth, catching up with values in the West End. Last month shopping centres were outperforming the rest of the Retail sub-sectors on the back of several landmark deals. The July results showed that this momentum continued, recording capital value growth of 1.1% over the month.
- Total take-up across all the regions and the Thames Valley & M25 has reached 3.99m sq ft, almost exactly on par with the same period last year and 20% above the average take-up of 3.3m sq ft during the ‘downturn’ period of 2008-2012; - Professional service firms have dominated take-up so far, accounting for 22% of floorspace transacted; - The ever diminishing pool of prime Grade A supply has led to developments in almost all regional centres either having already started or on the cusp of commencing, with site clearance underway in some instances; - The year has seen a vast improvement in the regional capital markets. With £1.5bn in volumes invested into the office sector this is already more then we saw transacted in the whole of 2011, 2012 and 2013 and is quickly approaching the ten year annual average of £1.8bn. - Capital growth we have seen this year has been driven entirely by yield compression. Outside of London and the South East there has been very little underlying rental growth in the regions.
Investor demand building across the sector Specialist care - approximately £1bn of transactions currently in the market, including both corporate sales and sale and leasebacks. Elderly care - over £600m of elderly care stock in the market, comprising corporate sales, investment sales and sales & leasebacks. Hospitals - further private hospital sales in the UK are likely in H2 2014. Innovation and development in the care home market – a race for space! The Goodman Group talk about their operating philosophy and UK growth plans.
SOUTH EAST OFFICES HIT THE ‘SWEET SPOT’ IN TERMS OF RENTAL GROWTH AND YIELD SHIFT Rental values for all UK commercial property continued to increase in Q2 2014, albeit at a slightly slower rate than in the previous quarter. Yield shift also contributed to capital value growth, with the average prime yield falling by a further 17 basis points over the quarter to stand at 5.7% at the end of Q2 2014. Capital values at the ‘All Property’ level increased by 3.8% over the quarter. The office sector is presenting an interesting pattern of performance. The Central London market is showing strong rental growth, however, yields have stabilized and showed very little movement in Q2. In contrast markets in the rest of the South East and Eastern regions are generally performing well in terms of both rental value growth and yield shift. The combination of increasing rental values and falling yields means that this part of the UK is currently showing the strongest capital value growth for the office sector. The other significant trend is the contrasting yield movements in the segments of the retail sector. Yields for both Shopping Centres and Retail Warehouses fell sharply in Q2 2014. In contrast the fall in the average prime yield for high street retail units was generally much smaller