YIELD SHIFT ACCELERATING OUTSIDE LONDON AND THE SOUTH EAST AS REAL ESTATE INVESTORS SEARCH FOR VALUE At the national level, prime UK rents continued to rise during Q3. Rental values increased by 0.6% over the quarter and 2.4% over the last nine months. All the main sectors except retail warehouses experienced positive rental value growth. Prime yields fell by an average of 7 basis points to 5.7% over the quarter. So far this year yields have fallen by an average of -42 basis points. Despite the weakness in rental values there continues to be very strong investor demand for retail warehouses across the UK. Over the last twelve months there have been over £3 billion of retail warehouse transactions, the highest level since 2007, with UK institutions by far the most active buyers. In terms of yields shift, the office sector recorded an interesting pattern, with Rest of the UK seeing significantly more yield compression than London, South East and Eastern. On average, Rest of UK excl. South East and Eastern recorded -13 basis points fall in yields. In contrast, prime yields in London remained stable. In terms of the investments, investors have been switching their attention towards the Rest of UK in 2014 in search of higher yields and better relative value. This has already been reflected in strong growth in investment activity, which is up 30% and the substantial yield premium means there is potential for significant further yield shift.
As our society is becoming increasingly globalised, world trends are becoming inextricably interwoven with local markets affecting sales rates, prices, buyers and products. This report reviews London's residential property market and identifies the parallels across leading global cities. Not only does it provide a snapshot of the residential markets, but also we are able to see how London competes with world class cities such as Hong Kong and New York. We aim to understand London in its global context by comparing: - the broader economic backdrop - overseas buyers - tax regimes - residential design
The latest office development cycle in key UK markets and why active occupiers should take note. A new wave of speculative office development is spreading across the UK. With Grade A supply running exceptionally low in most markets the new development cycle could not have come soon enough. By early 2015 all of the UK’s large city office markets and the South East will have speculative development underway for the first time in almost a decade. This will introduce much need choice for occupiers across the country. But with demand still on the rise, prospective occupiers must act now in order to secure the best office space for their needs.
In our latest regional land report, we examine how the key markets are performing nationally, and take an in depth look at the impact of commuters on house prices. We’ve found that property prices are a third cheaper in locations 30-35 minutes commute from Central London. The findings also reveal that an increase of one minute travel time reduces a house price value by around £11,400. Throughout Quarter 3, 2014, the regions across the UK have witnessed continued house price growth, which has in turn driven demand for land sites for development. We forecast continued steady growth into 2015.
RENTAL VALUE GROWTH PICKS UP ACROSS ALL SEGMENTS Total returns for All Property were 1.6% in September, driven by capital value growth of 1.2% over the month. Significant improvements were seen in the rate of rental value growth across all main sectors in September. All Property recorded rental value growth of 0.3% over the month, the strongest rate since December 2008. While the other property sectors saw rental values start to pick up some time ago, the retail sector has lagged behind. As a whole the retail sector recorded rental value growth of 0.3% in the month. Strong capital value growth in the UK means that total returns at the ‘All Property’ level in the first three quarters of 2014 have already exceeded those for 2013 as a whole. This is also true of all the segments monitored in CBRE’s monthly index, with the exception of West End offices.