News
Market Update
February 06
Business demand for property rose mildly in Q4 as office market activity strengthened whilst occupier demand in the industrial and retail sectors remained subdued. A stronger stock-market and continued expansion in the business and financial sectors helped shore up demand for office space, particularly in London.
Rental growth continued to strengthen in the three months to December, with strength particularly evident in the retail sector. The overall picture of gradual improvement in property take -up and rents is consistent with growing signs that the economy and business investment have turned a corner.
Investment demand for commercial property continued to soar in December with capital values rising at their fastest pace yet in the current cycle, up 12.2% on year ago levels. Property Data figures reveal that overseas investors have now overtaken institutional investors as the driving force in the investment market and accounted for close to 40% of all purchases in Q4 2005.
Indeed, only overseas investors and private individuals were net investors in Q4 2005 as many investor groups began to take profits, cashing in on a buoyant market. Further declines in global bond yields continued to feed through to yet lower commercial property yields in Q4. However, with significant net investment only now arriving from outside the UK, any tightening in global credit conditions (i.e rising bond yields) could have a negative impact on UK commercial property investment demand in late 2006 and into 2007.
Source: RICS Commercial Property Economic Brief Jan 2006
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