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LONDON-Average yields across the UK commercial property sector have continued their inexorable rise, according to new research from CB Hillier Parker. The average yield rose by a further 10bp to 7.3% during the third quarter of the year. But the rate of increase seems to be slowing, and this quarter’s increase was the smallest since yield began their upward lurch in the second quarter of 2000.

The retail sector has been hardest hit so far, but over the past quarter high street shop yields stabilised at 7%, the first time that shop yields have not risen since May 2000. Pressure on yields is now strongest in the Western Corridor office market and the South Eastern industrial market, where rental values are under greatest downward pressure.

Greg Nicholson, Head of Investment at CB Hillier Parker, said: ‘The end of the holiday season may see some increase in investment turnover, but there are precious few investors currently active in the market.’And he warned: ‘The institutions are unlikely to return to the market until the medium term prospects for the economy and rental value growth become clearer. The outlook for the highly uncertain US economy will be a key factor in many investors’ strategic planning. A deeper and more prolonged slump in the US economy will undoubtedly have serious implications for the UK property market.’

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