There was a minimal improvement in the performance of the UK's commercial real estate sector in June, with CBRE revealing capital values slid by 0.5 per cent last month, as opposed to the 0.6 per cent decline recorded in May. Meanwhile, returns for all property in the country stood at zero per cent, again registering an improvement on the -0.1 per cent posted in the previous month. London continues to be the strongest market, with investment returns and capital values remaining in positive territory here.
In its July 2012 Property Snapshot, Colliers International highlighted a similar trend, stating assets in London are the main focus for commercial property investment, with secondary markets struggling due to "lack of finance and an imbalance between buyer/seller expectations". However, Nick Parker, senior analyst of economics and forecasting at CBRE, believes there are opportunities in these secondary markets, despite the current economic outlook. "There is definitely scope for some entrepreneurial investors to make a mark in the UK property market in the coming years, with yields on secondary property still extremely high amid occupier uncertainty, and theoretical borrowing rates at extreme lows," he asserted.
Colliers International noted some investors are targeting real estate assets outside the capital, particularly in the retail and industrial sectors. The firm pointed to deals by SWIP and LaSalle for retail units in Glasgow and Coventry respectively, as well as L&G forward-funding a retail park in Stirling. Key transactions in the industrial market included Blackstone's acquisition of three warehouses in Rugeley, Dagenham and Doncaster, in addition to US-based real estate investment trust Digital Realty's purchase of three data centres in the south-east of the UK. Mr Parker said foreign investment in UK commercial property is "crucial at this juncture", noting non-domestic buyers have been particularly active in London, where they accounted for 75 per cent of all transactions in the city during the second quarter of the year.