Ian Scott International


Improved economy helps UK commercial property markets

The last year has seen a marked shift in the commercial property markets in the UK, powered by improved economic fundamentals which drive the underlying occupier base, according to new reports.

The broad based improvement in economic growth, aided by low inflation, has seen improvements in both consumer and business confidence, which should lead to rental growth where demand outstrips supply, says the latest analysis from Cluttons.

The firm’s Commercial Property Market Outlook report indicates that the industrial sector is now showing similar performance to offices, as Cluttons predicted last year.

Office total returns for the past 12 months are at 23% with capital growth of 16.8%, compared to the industrial sector which has delivered a total return of 22.7% bolstered by capital growth of 15.1%, driven primarily by yield compression.

‘As we forecast last year, sheds are now matching offices for performance. One reason is that prime logistics take-up has improved over the past year, driven by manufacturers, especially in the automotive sector, and retailers with supply constraints in key locations,’ said John Barrett, head of valuations at Cluttons.

‘Apart from the strong supply/demand fundamentals aided by supply shortages due to a lack of speculative development in recent years, the case for investment in the industrial sector is helped by low obsolescence and the squeeze on land supply from higher land value uses. This is especially the case in London and the south east,’ he explained.


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