Rising Rents Good News for Property Investors

Capital value growth is slowing and it is the property equivalent of “stock picking”, adding value through asset management, that will deliver performance going forward

Andy Brunner 11 February, 2016 | 2:42PM

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IPD have yet to publish its annual figures for UK commercial property returns but the quarterly data records the total return at 13.1% following 17.9% in 2014, driven by capital value growth of 7.8%.  One of the key factors behind the still strong returns was the upturn in rental values which grew by 4% in 2015, the highest growth rate since the last recession, according to CBRE.

The downward trend in capital values is generally forecast to continue in 2016 and, with growing uncertainty over global and UK economic growth and the Brexit referendum, UK commercial property total returns may now struggle to reach current consensus expectations of 9% or so.  Capital values have soared in excess of 25% over the past three years and prime yields have begun to stabilise in recent months. 

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK

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