UK Commercial Property on Rise

Total returns on UK commercial property have risen to 0.9% in August, according to the IPD UK Monthly Index.

Heralding a return to form with the highest total return level since March 2011, the improvement has been attributed to growth in the wider economy filtering down to the real estate sector.

The report claims the rise in returns is a product of a 0.4% rise in property values, which have grown by a cumulative 0.8% over the months since May 2013.

IPD also noted a stable 0.6% figure for income returns. Bonds and equities lost 1.6% and 2.4% in August respectively.

"All three main sectors saw rising total returns off the back of capital growth, but, critically, the retail sector saw growth for the first time since October 2011," said IPD.

Regional assets in the office and industrial property sectors saw rising returns, as growth and improving sentiment filtered out of the City.

Phil Tily, executive director & head of UK and Ireland, IPD, said: “This time last year, values were falling by 0.3% and the economy looked ready to slip back into recession. However, in twelve months we have seen economic growth returning (if indeed it ever left), consumer and business confidence rising, and a raft of improvements in other economic indicators.

“As this growth moves further out of London, income and value add opportunities in the regions, where income yields often exceed 8%, will start to attract investors willing to move up the risk curve.”