Central London prime offices have led the rebound in commercial property values since mid-2009, but capital growth in secondary assets has overtaken prime in the past few months.
Central London prime offices have led the rebound in commercial property values since mid-2009, but capital growth in secondary assets has overtaken prime in the past few months.
The polarisation in performance between prime and secondary property has been a dominant feature of recovery since mid-2009 but things have changed in recent months, according to CBRE's latest Monthly Index.
The CBRE Monthly Index data show changing trends in Central London office, with yields on prime Central London offices stabilising and the pace of capital growth decelerating sharply.
Yields on secondary offices have continued to tighten, pushing capital values up by 4.8% in the six months to June 2011, compared with growth of only 2.4% for prime offices.
'Yield compression on prime property looks to have run its course and over the last couple of quarters, secondary offices have outpaced prime in Central London, suggesting some greater willingness by investors to move up the risk curve,' said Peter Damesick, EMEA Chief Economist, CBRE.
'However,' he added, 'the evidence of improvement in secondary property shows it is biased towards the UK's stronger markets. While secondary offices in Central London have picked up, the capital growth index for the highest yielding properties in the Monthly Index for the UK as a whole is still flat-lining.'
