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Recovery Predicted for UK Office Sector

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United Kingdom  Edinburgh  real estate investments  Office Property Investment  Jones Lang LaSalle  London  Glasgow  real estate returns  Aberdeen 

Recovery Predicted for UK Office Sector

By - Friday 29 June 2012

There are signs a recovery is underway in the office sector of the UK commercial property market, with Glenigan noting that although there has been a drop in the number of new office construction schemes getting underway, this is not cause for concern in the long term. The firm revealed the value of office project starts has risen in the past 12 months, with London and the south of England the main focus of the activity. Citing figures from CBRE, Glenigan highlighted the strong take-up of office space in the capital during May, as well as pointing to Scottish cities such as Glasgow, Aberdeen and Edinburgh, where occupancy rates have also been climbing.

The organisation stated: "The office sector is in a period of recovery following a traumatic post-credit crunch slump in building. The market has improved - especially in prime locations - and demand has firmed." In its latest UK commercial property forecast, Jones Lang LaSalle stated London West End and City offices are among the few sectors where returns are expected to grow over the course of this year. The firm revised its estimates for total real estate returns in 2012 down to two per cent - considerably lower than the historic average of nine per cent - although offices in London's most sough-after areas are set to far outperform the wider British market.

According to Jones Lang LaSalle, West End office investments will deliver a return of 5.8 per cent this year, while City schemes will provide a 4.5 per cent return. Predictions for rental growth in both these areas is also strong, with a lack of new stock in the West End supporting the market and encouraging annual rents to rise by 4.9 per cent over the next five years. Meanwhile, DTZ recently upgraded its outlook for West End offices from warm to hot in its latest UK Fair Value Index. The organisation anticipates capital growth of 20 per cent among this asset class in the next five years. Overall, DTZ found the UK commercial property sector has become better value for those seeking a real estate investment, with the firm asserting "pricing is the most attractive it has been for investors since mid-2009".

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