Article | Intelligent Investment

Dispersion of UK Commercial Real Estate Returns

July 11, 2023 4 Minute Read

By Steven Devaney


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Real estate indices are a useful tool to measure overall market performance. However, not all properties will perform like the wider market. The cash flows or values of individual properties can respond differently to changes in market conditions or other events. This leads to variation in investment performance between assets, the scale of which is often not fully appreciated.

Given that many investors take decisions based on expected market or sector trends, it is vital that they understand the risks that arise when individual properties do not perform in a uniform manner. With this in mind, we examined the variation or dispersion in total return rates on the properties in CBRE’s UK Monthly Index.

By how much did returns vary across individual assets?

We tracked the interquartile range in total return rates (our chosen measure of spread or dispersion) for each month since January 2017. The average interquartile range was 1.2%, but as Figure 1 shows, there was considerable variation around this.

Figure 1: Interquartile range in monthly total return rates for All Property

Source: CBRE Research

The spread in total returns each month was relatively stable until the start of the pandemic in 2020. Since then it has been higher and more variable. Three of the four highest figures for the interquartile range in total returns were recorded between October to December 2022, when the values of many commercial real estate assets fell sharply. However, this variability in total returns moderated during the first quarter of 2023 as values stabilised.

These results indicate that the spread in investment performance widens when there are strong market movements. In part, this has been driven by the fortunes of specific property types. In 2018 and 2019, retail values were falling while values in other sectors were not, while 2021 saw strong demand for industrial assets following the pandemic. Yet, Figure 2 shows that returns for assets in the same sector can vary widely as well.

Figure 2: Interquartile range in monthly total return rates for the retail, office and industrial sectors

Source: CBRE Research

Both the retail and industrial sectors have had long spells where differences between the returns of assets in those sectors was high. Interestingly, though, the office sector only exhibited high levels of dispersion in mid-2020 and in late 2022.


Individual property investments often perform differently from the market overall. While they will still be affected by broader trends, their performance can respond differently to the same set of economic or market events. They are also affected by asset-specific factors connected with their physical, legal or operational characteristics.

If an investor bases their strategy and decisions around expectations of how specific sectors or the market in general will perform, then variations in how their own properties perform could pose issues for achieving financial objectives and keeping investment strategy on track.

Therefore, investment decisions should consider the risks associated with individual properties. This is even more critical in periods of strong market movements, where the values of different buildings can change to varying extents, as shown by the high spread in individual asset returns during the recent downturn.

Explore the full viewpoint that provides more detailed results and discussion of how the study was carried out.

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