UK prime yields fall as market continues to stabilise: C&W

Prime yields fell 9 bp in February as the UK commercial property market continued to stabilise after a period of rapid re-pricing in the fourth quarter of 2009, according to Cushman & Wakefield’s latest business briefing.

Demand for UK commercial property remains high across all sectors but is currently strongest for London offices and retail warehouses. Cushman & Wakefield said all sectors are seeing an increase in the sale of properties purchased last year but prime stock is still typically hard to source and aggressive bidding is continuing. However, yields are settling to a level reflecting fair value in the current environment and are stabilising in the high street and office markets in particular.

Sentiment and capacity in the debt market have continued to improve but lenders are focussed on prime assets and many will struggle to meet their lending targets given that debt-backed buyers are not generally able to compete with equity players based on current lending terms.

David Erwin, CEO of UK Capital Markets at Cushman & Wakefield said: 'February has been a month of further consolidation and there is still very significant equity, particularly for London. The investment market firmly remains in favour of the vendor. Whilst this is set to continue, the last couple of weeks have perhaps seen the first signs of more discretionary investing than we have seen for a few months. Investors seem marginally less hasty in their decision making which ought to be to the long-term benefit of a sustainable recovery in pricing. Agents can still expect a busy run up to Easter.'