Commercial property yields at lowest level since Brexit vote

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UK commercial property yields are at their lowest level since the EU referendum, according to the latest data from Savills’ prime yield series.















Yields hardened by 0.1% to 4.65% in August following three months of no movement. Low levels of investment stock combined with continued investor appetite caused the shift according to Savills.

Regional office yields dropped from 5.25% to 5% in July, while both industrial and hotel yields in the regions fell from 5% to 4.75%.
During August, yields for retail warehouses and foodstores followed suit, hardening from 5.75% to 5.5% and from 5% to 4.75% respectively. Foodstore yields now sit at their lowest level in nearly three years.
The research also showed that UK investment volumes for the year to date remain stable compared to the previous year, but transaction volumes have fallen 6%. However, they are still consistent with the long-term average, Savills added.
Mark Ridley, chief executive of Savills UK and Europe, said: “Following the General Election, the UK markets saw an uptick in investor interest with the result that this summer saw the largest yield shift this year. While overseas interest in London remains unabated we are also seeing an uptick in the number of institutional investors keen to deploy capital outside of London, in markets that are not as likely to be directly impacted by the UK’s departure from the EU.
“Logistics, regional offices and foodstore assets have therefore performed well. The latter are particularly attractive at the moment as they offer long term indexed linked income, potential asset management opportunities led by residential or mixed use development, and the occupational market has also seen a resurgence driven by potential M&A activity by Tesco looking to purchase the Booker Group and the Co-op looking to do the same with Nisa.”

Source: Property Week