Reasons for optimism in the final quarter

With the UK Commercial Property market resuming after the summer break, we'd like to share 3 interesting publications from the last week and a few key points we have picked out which may shed some light on where the market is heading:

CPAD (Commercial Property Auction Data) Report, Sept '15

  • The highest sale rate in 20 years was seen in July '15 suggesting supply has been constrained and demand remains strong. This is partly attributed to the difficulty for owner in reinvesting sale proceeds for an equivalent return.
  • Borrowing interest rates are at historic lows
  • The average property yield in auction was 8.82% in May '15
  • 87% of properties sold were located outside London, demonstrating the increased appetite for regional investment

Allsop Summer Review '15

  • Improving confidence and tight supply in London is pushing more investment into the regions
  • Whilst the most secure properties are still yielding 4-5%, the highest risk property yields have fallen from 15% to 12.5% in the last 18 months, demonstrating investor appetite for risk has increased.
  • Receivership sales have fallen from 11% to 7% of sales
  • More buyers are buying properties outside of the region in which the live, which reinforces the idea that investors are looking further afield for good returns

Local Data Co Vacancy Report H1 '15

  • In H1 2015 the GB retail and leisure vacancy rate reduced from 11.9% in H2 2014 to 11.7% (-0.2%)
  • The good news of reducing vacancy rates has run in parallel to better economic performance within the UK, and growing retail sales and consumer confidence.
  • At a town centre level there is considerable variance between the best and the worst. Of the worst, some have endured persistent and rising vacancy for several years now, suggesting there is over supply or the wrong size of space in the wrong location but others have improved as a result of proactive management.

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