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Valuations worsen as property yields continue to fall

Property valuations, compared to bonds and equities, deteriorated for a fourth consecutive quarter in Q4. The spread between the asset classes narrowed as the magnitude of the fall in all-property yields outweighed marginal downward moves in gilt and equity dividend yields. We expect property valuations to come under more pressure in the coming months as bond yields rise.
Pieter Du Preez Property Economist
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UK Commercial Property Update

Student accommodation rent growth to stay solid

Student enrolment remained robust during the last couple of years and is likely to continue growing strongly over the next decade. But supply of purpose-built beds has grown less rapidly and the pipeline points to a continued lag against demand. This demand-supply imbalance will likely support solid rent growth over the coming years.

24 June 2022

UK Commercial Property Chart Book

Signs of a slowdown emerging

Annual all-property rental growth reached a five-year high in May, while returns rose to levels last seen in mid-1994. But signs of a slowdown also emerged, especially in the red-hot industrial sector, where capital value growth and total returns eased for the first time in almost two years. In addition, the recovery in retail and offices lost some steam, with monthly rental growth rates nudging lower. We expect the pace of growth will let up soon as yields start to stabilise and structural changes weigh on occupier demand. As such, we expect returns to cool to below 10% by end-2022.

22 June 2022

UK Commercial Property Update

Will Manchester office rental growth outperform again?

After a more severe downturn in 2020, Manchester office rental growth has caught up with other regional cities in recent quarters. While employment growth and occupier activity may remain fairly weak, tight new supply dynamics should see Manchester office rents rising broadly in line with the average of other regional offices over the short term.

17 June 2022

More from Pieter Du Preez

UK Commercial Property Data Response

IHS Markit/CIPS Construction PMI (Jan.)

In contrast to the decline at the end of last year, the construction PMI rose to its highest level in six months in January. There were also encouraging signs that supply and cost issues have started to ease, but we suspect that they will continue to constrain output in the near term.

4 February 2022

UK Commercial Property Data Response

RICS Construction Market Survey (Q4)

The latest RICS survey indicated that activity in Q4 and the outlook for the short term were broadly unchanged. The survey also suggested that labour and material shortages will continue to hurt activity in the coming months.

3 February 2022

UK Commercial Property Data Response

Lending to commercial property (Dec.)

A marked jump in lending to standing property resulted in total net lending reaching its highest level in just over 18 months in December. Although this is encouraging, several challenges remain during the first half of the year, which means lending is unlikely to stay as strong.

1 February 2022
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