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Insight & Opinion

Recovery in commercial property led by offices

Author: Staff

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The commercial property market in the UK is experiencing something of a ‘three-tier’ growth in 2015, according to the latest reports, with the office sector being the star of this ascension.

In the Knight Frank June market outlook report, the company said that in the month of May, commercial capital growth across all asset classes rose to 0.8 per cent from the 0.5 per cent that had been recorded one month earlier in April.

However, while this is a very strong position for the market to be in as we approach the summer months, there is a very distinct divide, Knight Frank said, between the best and worst performing assets in commercial property.

At the top of the scale is office stock, which saw capital growth of 1.5 per cent in May. This was far ahead of the slowest sector, retail, where capital growth sat at just 0.2 per cent during the month. However, the fact that all sectors are seeing growth, however small, is still a real positive for commercial stock as a whole.

Knight Frank said that the strength in the office market is being underpinned by the fact there are now more and more companies looking to rent office spaces. Office vacancy rates in some areas of the country are as low as 2.4 per cent, showing how high demand is at the moment.

Elsewhere in the commercial property market, returns have fallen to 17.6 per cent, although this is expected to be seasonal, and returns should pick up again towards the end of the year when activity levels start to grow again.

In addition to this, it was reported by Knight Frank that levels of investment continue to grow, showing that the positive sentiment from buyers is still there. Between January and May, commercial property welcomed some £23.6 billion worth of investment. This was up markedly from the £17.8 billion that was invested in the same period last year.

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