Office prices in the City of London fell for the second consecutive month in July despite pressure from overseas buyers, indicating values in the sector may be past their peak, according to IPD.
Office prices in the City of London fell for the second consecutive month in July despite pressure from overseas buyers, indicating values in the sector may be past their peak, according to IPD.
Values rose by just 1.7% in the first five months of the year before falling by 0.6% across June and July. In the past three years, offices in the City of London have seen cumulative growth of over 36%, but this largely tailed off in 2012..
The West End is now the only area of the UK recording consistent growth, with office rental values increasing by 0.4%, and capital values by a further 0.5%. The IPD UK Monthly Index shows values across the UK have now fallen by 2.5% since November last year.
Despite capital writedowns in the City, total returns for UK property rose slightly in July, to 0.2%. Declining values in the retail sector abated slightly, and the income return on commercial property crept up to 0.6%, a result of the lower capital values across the UK.
July was a better month for the struggling retail sector, with total returns coming back into positive territory, at 0.1%, having been negative for the two months before. Regional shopping centres continued to be the hardest hit part of the retail market, losing a further 1.4% of their values in the last month, and have now seen cumulative capital declines of 11.8% since July last year.
'Initial yields are now around 6.3% across the UK, but they rise to over 7% for industrial assets, and over 8% for some of the regional office markets,' said Phil Tily, managing director for IPD UK and Ireland.