Moderate July results for UK commercial property growth

In the UK, values of commercial properties increased by 1.1% during July, which is a decline on the 1.6% growth during June.  This has however been the second highest monthly increase for 2014.  It shows that the recovery in property value which commenced during May is continuing. The IPD UK Monthly Property Index indicates that property values have increased by 11.2% over a 15 month period, but is still way below the 30% experienced during 2007.

Commercial real estate saw a return of 1.6% for July, with income return at 0.5%.  This is a favorable comparison with other asset class performance during this period, with bonds at 0.4% and equities at 0.0%. Offices and industrials, as in the previous month, shared the top position with a return of 1.8% during July.  Retails followed with 1.4% and continue lagging other sectors.

The Outer South-East offices showed the best performance, with 2.7% for July, with Central London stores hot on its heels at 2.5%.  Industrials remained similar across the country.

Yield compression added 1% to 1.5% to industrial values across the country, and 1.8% to retails in Central London and office value in the Outer South East. The rental market remains strong and values rose by 0.2% during July.