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UK commercial property total returns hit 10.2% at the end of November, to already sit ahead of the IPF’s consensus forecast of 8.5% for 2017 as a whole.

CBRE’s latest monthly index found that total returns for November were 1% as the industrial sector out-performed the metrics to give a 0.5% rise in capital values and 0.2% rise in rental values month-on-month overall.

Industrial capital value growth again was the top performer in November, at 1.5% and South East industrials slightly drove this with an increase of 1.6%. Rental value growth in the industrial sector was 0.5%, with the South East again slightly outperforming the rest of UK at 0.6% and 0.2% respectively.

The retail sector also recorded capital value growth, hitting a figure of 0.2% in November while retail warehouses slightly outperformed the other subsectors for the second consecutive month with growth of 0.3% as shopping centre capital values high street shops in the South East both saw no growth.

In the office sector, capital values rose 0.2% despite the City submarket recording a decrease of 0.1% and both the City and West End & Mid Town submarkets reported a decrease in rental values in November at -0.1% and -0.2% respectively.

Miles Gibson, head of research at CBRE UK, said: “UK property has performed steadily and above expectations in 2017 so far, with total returns now in double digits. Industrials continue to lead the way.”

’Robust’ 2018 outlook

CBRE’s accompanying 2018 Market Outlook predicts that the market will continue to perform solidly “despite political unknowns”. They project that property investment volumes will be roughly the same in 2018 as in 2017 although total returns to property are expected to be drop to around 4%.

Gibson added: “While some property sectors will see extremely patchy growth performance [in 2018], the rise and rise of industrials & logistics looks likely to continue, and the ‘beds sectors’ like hotels, built-to-rent and healthcare are also set to grow strongly. Whilst significant risks remain, from reduced consumer spending power, changes to US interest rates and the Brexit denouement, we anticipate robust investment volumes in the property sector in 2018.”

Source: Property Week

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