Downward pressure is most evident in the high street shop sector, where yields improved by 20 basis points to 6.8%. Office yields reduced by slightly more than 10 basis points to 7.4%, largely due to improving yields in Central London and the South East. The average industrial remained static at 7.9%, although there were reductions in London and Scotland.
According to CBHP this latest improvement in property yields reflects the substantial weight of money currently targeted at the sector from institutional, private and overseas investors. But Head of Investment Greg Nicholson said: "The third consecutive quarterly fall in the average yield is difficult to reconcile with the weak conditions within the occupational markets where rental value growth has stalled since the turn of the year." CBHP calculates that average UK commercial rents are down 1% on this time last year, the first time rental growth has turned negative since 1994.
"Sluggish tenant demand reflects the uncertain economic climate and an element of corporate paralysis," said Nicholson. "However, investors are currently looking beyond the short-term growth prospects and focusing on property's inherent value. An above-average income return, combined with the benefits of upward only rent reviews, means that property represents a safe-haven in the present climate."
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