CBRE's latest monthly index shows a decline in values again, but its head of UK research says there is room for optimism.
Jennet Siebrits said although commercial real estate values fell again in December, capital values in the retail and industrial sectors appeared to have bottomed out.
'Coupled with expected interest rate cuts later in the year mean we should start to see the beginning of an economic recovery that will benefit real estate performance and boost investor confidence. While the prospects for yield-driven capital growth will be limited, income returns will underpin an improvement in total returns and a falling inflation rate will increase the likelihood of positive real returns from for investors.'
In December, rental values rose by 0.4%, while total returns were -0.4% for the month.
The December result means that capital values fell by 3.9% for 2023 overall. However, this was shallower than the fall of 13.3% reported for 2022. Rental values for commercial real estate rose by 3.6% in 2023, and total returns were 1.7% for the year.
Office capital values fell thr heaviest by 1.5% in December, meaning capital values for the sector decreased by 11.5% for the year. Central London capital values fell by 1.6%, which was larger than the declines seen for Outer London/M25 offices and Rest of UK offices (1.4 and 1.3% respectively).
Office rental values increased by 0.3% over the month and 2.1 per cent over the year.
Capital values for the Industrial sector decreased by 0.4% in December. Retail capital values decreased by 1.0%.
