Commercial property values in the UK rose by a further 1 per cent in March, continuing the steady growth seen during the first two months of 2014.
According to the IPD UK Monthly Property Index, values have now risen by 6.8 per cent over the last 10 months of consecutive growth, although overall they still remain below their 2007 peak levels.
Real estate total returns for the month were 1.6 per cent, boosted by an income return of 0.5 per cent.
Strong returns for the industrial and office sectors, at 2.2 and 1.9 per cent respectively, were driven by capital value growth. For the recovering retail sector, a total return of 1.1 per cent was aided by capital growth of 0.6 per cent.
Rental performance remained positive but muted, returning a modest 1.2 per cent gain over the past 12 months.
Rental values have continued to struggle in the retail sector, as lackluster occupier demand and muted consumer confidence kept rents flat.
Retail rents have been in decline for over 70 consecutive months since May 2008, leading to a cumulative decline of -12.6 per cent. While expanding businesses are demanding space in offices and logistical parks, demand remains far more muted for retail space, particularly outside of key urban centres.
Total returns for standard shops outside of the south east rose to 1 per cent in March. Comparably, offices outside of the south east returned 1.2 per cent. Retail warehouses and shopping centres also saw an upswing in March, with retail parks across the UK returning 1.2 per cent in March, while shopping centres returned 0.9 per cent, thanks to improved value growth of 0.3 per cent.
Phil Tily, executive director and head of UK and Ireland, IPD, said "the broader UK commercial real estate market continues to show signs of recovery and growth, with March proving to be the strongest month of 2014 so far.
“While rental values remain weak for the beleaguered retail sector nationally, improving investor sentiment, added 0.6 per cent to capital values in March alone. Notably, the rate of capital growth for retail parks, distribution warehousing and department stores more than doubled month-on-month.”
