The upward trend in UK property values was maintained in May with prime yields falling 6 basis points to 5.14% and secondary yields down 29bp to an average of 8.13%, Cushman & Wakefield has reported.

The upward trend in UK property values was maintained in May with prime yields falling 6 basis points to 5.14% and secondary yields down 29bp to an average of 8.13%, Cushman & Wakefield has reported.

Prime yields have now fallen 54bp over the past 12 months, an implied capital growth rate of 10.2%, but with a fall of 196bp, secondary values have easily outperformed, with implied capital growth of 24.1%.

By sector, it has been retail which has seen most gains in the prime market, led by retail warehouses.

However, for secondary properties, office and industrial values have gained most, reflecting an ongoing nervousness over the relative outlook for occupational demand in parts of the retail market. Interestingly, however, investment demand is now increasing for secondary retail, focusing on the shopping centre sector. By contrast demand for secondary shops and retail warehouses, whilst improved, is still lower than in other segments.

COMMENT
David Hutchings, Cushman & Wakefield’s head of EMEA investment strategy, said: 'Strong buyer demand and limited supply have continued to drive down yields but the gains for secondary property have been the most dramatic – with an implied increase in capital values of over 24% thanks to lower yields in the past year compared to a 10% gain for prime.

'Sector trends do show somewhat different patterns, however, with retail seeing the greatest prime growth but office and industrial gaining most in the secondary sector. Yields are set to move lower still in the second half of the year, but there are now signs that higher pricing will soon bring forward more stock and that should steadily help to stabilise pricing.'

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