The CB Richard Ellis (CBRE) prime rent and yield monitor for UK commercial property showed the All Property average prime yield rose 20 basis points to 5.9% in the first quarter of 2008, a sharp easing from the 50 basis points rise seen in the last quarter of 2007. With yields edging out across all property sectors, CBRE said the All Property average prime yield is now 110 basis points higher than a year ago.
The CB Richard Ellis (CBRE) prime rent and yield monitor for UK commercial property showed the All Property average prime yield rose 20 basis points to 5.9% in the first quarter of 2008, a sharp easing from the 50 basis points rise seen in the last quarter of 2007. With yields edging out across all property sectors, CBRE said the All Property average prime yield is now 110 basis points higher than a year ago.
'The further outward yield movement in Q1 was far weaker than in Q4, suggesting that the re-pricing that began in mid-2007 has largely run its course,' said CBRE head of UK research Peter Damesick in a statement. 'Property yields now look more attractive relative to bonds, with the average prime yield back to its level of early 2005. However, the slowing economy and credit crunch impacts on occupational demand are starting to weigh on rental projects in some sectors. Rents rather than yields may now become the main driver of value changes in the coming months.'
CBRE said quarterly re-pricing was softest for high street shop yields, which increased 10 basis points compared to 20 basis points for offices and 30 basis points for both retail warehouses and industrials. The real estate services firm noted property now has a positive yield gap of 150 points over benchmark government bonds.
The average All Property prime rental values contracted 0.1% in the quarter, largely a reflection of sharp rental downgrades in the Central London office market, but still showed annual growth of 4.0%. Prime City of London office rents fell 5.5% in the first quarter of 2008.
