CB Hillier Parker - General - Income Security the Key to Investors Undiminished Appetite for Property
Date: 04 Sep 2002
The CB Hillier Parker All Property Average Yield fell for the third consecutive quarter to stand at 7.2% in Q3 2002. Downward pressure is most evident in the high street shop sector, where yields improved by 20 basis points to stand at 6.8%. There were also reductions in average office and retail warehouse yields.
This latest improvement in property yields reflects the substantial weight of money currently targeted at this asset class from institutional, private and overseas investors alike. Property’s above-average income return has proved popular with investors in the current low capital growth environment, particularly in the wake of the ongoing turmoil in the global equity markets.
Despite weak rental value growth property returns have improved over recent months as a result of falling yields and property is expected to out-perform both UK equities and gilts over the course of 2002.
Commenting on the CB Hillier Parker Average Yield, Greg Nicholson, Head of Investment at CB Hillier Parker, said:
“The UK commercial property market is in a state of flux. The 3rd consecutive quarterly fall in the CB Hillier Parker All Property Average Yield is difficult to reconcile with the weak conditions within the occupational markets where rental value growth has stalled since the turn of the year. Sluggish tenant demand reflects the uncertain economic climate and an element of corporate paralysis. Occupiers are unlikely to commit to major new property requirements until the tentative recovery in the global economy becomes more firmly established and equity markets stabilise.
“However, investors are currently looking beyond the short-term growth prospects and focusing on property’s inherent value. An above-average income return, combined with the benefits of upward only rent reviews, means that property represents a safe-haven in the present climate. A switch into equities has yet to materialise and we are confident that property will remain a core element of any multi-asset portfolio. We are forecasting rental value growth to return in most UK property markets from mid-2003 onwards and until such time property will remain a sound income play for investors.”
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