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| Prime yields have "topped out" with some inward movement Sentiment in UK investment markets has improved over the past two months with the majority of yields hardening, by over 50 bps in some cases, according to international property advisor Savills. Furthermore the average rate of capital value falls is declining with values appearing to be close to bottoming out. Savills notably recorded a 25 bp yield fall in June within the West End office market to 5.75% – the first reduction in prime equivalent yields since October 2006. Despite a weakening occupational market, the lower yield will assist to maintain office values in the West End which at their lowest stood at 3.5% in August 2007. This fall in West End yields mirrors that in the City which saw falls from 6.75% to the current level of 6.5%. In the retail sector, yields have also moved in within the retail warehouse market. In line with the peak in the wider UK property market, Open A1 Retail Warehouse yields were at a low of 3.75% in May 2007 before rising consistently to 7% by April 2009. However, the past few months have seen an improvement and they currently stand at 6.5% as investor interest rises and deals are transacted. Contrary to this, the report indicates shopping centres continue to show a rising yield profile reflecting net initial yields of 7.25% from a low of 5% in February 2008. However Savills suggests this is due to a lack of transactional evidence with only two shopping centre transactions recorded in Q209, as well as a weaker retail environment. write your comments about the article :: © 2009 Construction News :: home page |