The UK commercial property market has performed strongly yet again in the third quarter of the year, but rises in valuation are now starting to moderate, the latest IPD UK Quarterly Property Index has shown.
A report has also shown that the regional office market has seen strong uptake in recent months, with this now at its fastest level for four years, and no doubt this will have been a contributing factor in the three per cent rise in value for all property in the last three months.
However, while this increase marked a strong quarter yet again, IPD said that it was also indicative of the start of the moderation of prices, which could show that the market is maturing and edging towards long-term strength. In the second quarter of the year, valuation rises had sat at 3.3 per cent, so the third quarter was slightly slower.
While values were rising slower than earlier in the year, though, returns are still showing impressive rises, which is good news for investors. In the 12 months to the end of September, returns hit a level of 18.3 per cent in commercial property, which was markedly higher than the 16.4 per cent that was experienced in the year to the end of June.
Breaking down the sectors, industrial led the way for the quarter, matching its returns in quarter two of 5.4 per cent, while the office market was only slightly moderated at 5.1 per cent. Offices also saw the strongest capital growth with a rise of some 3.9 per cent.
Although retail was the weakest performing sector, with the 3.7 per cent quarterly return dropping quite substantially from the 4.3 per cent seen three months earlier, value still saw a reasonably strong quarter, rising by 2.3 per cent.
IPD said that a continued high level of demand from businesses is behind this strength in the market as we head into the final quarter of the year.
Phil Tily, executive director and head of UK and Ireland, said: “The latest IPD quarterly figures show that UK commercial real estate continues to be buoyed by strong investor demand, reflecting the country’s positive economic outlook at present compared to many other parts of the world, as well as the transparency and liquidity of the UK property market.
“The performance of London real estate across all three sectors stands out once again in Quarter three, with the strength of the capital’s retailing and its office occupier demand driving returns. Meanwhile many UK regions, even if looking slightly more subdued than in Quarter two, are still sharing in the overall picture of solid rental markets and rising values.”