UK property yields stabilise as investment is set to increase: C&W

Cushman & Wakefield forecasts investment activity for 2013 will hit £35.5 bn (€42 bn), 7.5% ahead of 2012.

The UK property investment market ended 2012 on a stronger note than many expected, with stabilised yields and higher investment activity in the closing months of the year, according to a report by the property adviser..

Deal volumes closed the final quarter of 2012 at around £8.5 bn, on par with Q4 2011. However, volumes for 2012 as a whole are estimated at £33 bn, just below the 2011 level of £33.5 bn. This has been characterised by fewer, larger transactions with a total of 1,400 deals in 2012 compared to 1,800 in 2011.

Additionally, the UK’s share of the European market has risen from 30% to 35%.

Confidence has remained cautious overall but there is a greater willingness on the part of investors and financiers to act and an acceptance of pricing levels for better assets. Trading volumes increased by 15.6% between the first and second halves of the year.

Prime yields for the best space have stabilised and may harden in the months to come.

But Cushman & Wakefield said it was clear that weaker property, where income will be hard to replace let alone grow, may see yields rise further before risks are adequately covered.


Cushman & Wakefield’s head of UK capital markets, David Erwin, said: 'We begin 2013 on an optimistic note. Volumes held up well in 2012 and we can identify plenty of unallocated equity for our sector looking for a home. Rental incomes haven’t completely stabilised outside of London but market pricing is taking that into account and liquidity is improving.

'If investors are looking for stock and opportunities with above average returns, they may have to move up the risk curve and based on current sentiment changes, we think they might, albeit cautiously. It could be a good year for non-core prime which seems to fit the bill for those seeking both income and capital growth.'