Commercial rental values in 2015 grew at steepest rate since recession

Commercial property investments in 2015 benefitted from the highest rental value growth since 2008, a new index has revealed.

According to the latest CBRE Monthly Index, the total return on investment from UK commercial property hit 14% at the end of 2015, as December secured returns of 1.1% for the month.

Total returns fell between the 19.7% high seen in 2014 and the 11.5% experienced in 2013.

The growth of All Property rental values reached 4% in 2015, the highest growth rate since 2008.

Remaining stable at 0.4% in December, rental value growth has stayed flat since September 2015, ending the year higher than the 0.2% in January and up on the 2015 monthly average of 0.3%.

In London, the rental value growth of West End and Midtown offices slowed from 1.3% in November to 0.7% in December.

Despite their rental value growth being effectively halved, Midtown offices were the best performer of 2015, with an annual total return of 22.9%.

At 0.7%, capital value growth across all commercial property sectors and regions also remained flat in December, having been sub 1% since January 2015. Capital values grew by 8.3% over the course of 2015, behind the 12.9% for 2014.

The strongest performing sector in 2015, in terms of capital value appreciation, was Offices at 12.8% followed closely by the Industrial sector at 11.2%.

Miles Gibson, Head of UK Research, CBRE, said:

“An urgency to close deals in the last month of the year meant that total returns spiked quite significantly in December 2013 and December 2014. This simply didn’t happen in 2015. Nevertheless, rental and capital values both performed well for investors in 2015, continuing the upward trend seen in the last few years.”

 

Take a look at our Commercial Mortgage Update in Q1 2016 FirstRate here.

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