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LONDON-Property yields are falling despite the weak demand from property occupiers, according to Cushman & Wakefield Healey & Baker. Driven by poor performance in other investment media, investors’ appetite for good stock has continued to rise and remains ahead of supply, and this has resulted in downward pressure on yields despite the weaker lettings market.

Tim Sketchley, Head of Central London Investment at Cushman & Wakefield Healey & BakerC&W/H&B, said: “Investor demand is currently strongest in the retail sector, followed by industrial and there continues to be demand for well-let offices, even in those areas experiencing a downturn in the occupier market, such as the Thames Valley market.”

But he pointed out that on the occupational side the office market continues to suffer, hit by the double whammy of threats of redundancies and corporate failure. However, Central London office rents were largely stable over the last quarter.

But despite this, Sketchley said yields could go lower still. “There is still a gap between yields and interest rates with research indicating that the investment market can, as such continue to ignore the weaker letting market for some time yet,” he said.

“Overall there is a strong belief that property is now adjusting to the low inflation, low interest world that has led to a re-rating in most other investment sectors. Prices are reacting as much to change in finance and investment markets as to occupier trends and property fundamentals,” Sketchley said.

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